Australian FOREX Daily Outlook 03/04/2007

CURRENCY TRADING SUMMARY –03 APRIL 07 (23:30GMT)

• U.S. Dollar Trading (USD) slid against all other majors on Monday as markets await Friday’s jobs data and other indicators on a possible rate cut. Manufacturing ISM came in a little worse than expected at 50.9 (Forecast: 51.1) yet the Dollar shrugged it off as a non event. Federal Reserve official William Poole made comments yesterday that the Sub-prime mortgage market wretchedness was likely to be limited. He also noted that the risk of recession were “slightly elevated” but not high. Poole also stated on Monday that if the economy slowed modestly yet inflation was futile in moving towards 2% then it would be difficult for him to see a cause in cutting rates. In US share markets, the NASDAQ rose by 0.62 points (+0.02%) whilst the Dow Jones also rose by 27.95 points (+0.22%). Crude oil rose by US$0.59 a barrel to end at US$66.46 as reports circulated that the standoff between US and Iran may affect global supplies.

• The Euro (EUR) gained against the greenback on Monday despite a softer reading for PMI. With markets expecting a figure 55.7 the data was released at 55.4. Overall, the Euro traded in a range of a low 1.3332 and a high of 1.3384 before closing at 1.3364 in the New York session. Looking ahead, Tuesday sees the release of PPI for the month of February with analyst expecting further growth to 0.3% from the previous 0.1%

• The Japanese Yen (JPY) remained relatively unchanged and was subject to plenty of sideways trading despite the Tankan Survey (Q1) indicating business confidence had declined for the first time in 12 months, yet did nothing as investors were confident that the BoJ will sustain rates at current levels in the immediate future. Overall, the JPY traded within a range of a low 117.40 and a high of 118.08 before closing at 117.79 during the New York session, to end the first day of the new Japanese business year.

• The Sterling (GBP) rallied to touch nine week highs against the dollar ahead of the possibility that the BoE may raise interest rates on Thursday. Although many analysts predicted that the BoE would look to May or June for the next quarter point hike, plenty of investors took a hawkish stance pricing a 40% possibility that the hike will be seen during MPC April meeting. In other news, the Sterling did well to shrug off data showing that UK manufacturing had slowed for the month of March. Overall, the GBP traded in a range of a low 1.9665 and a high of 1.9800 before closing the day at 1.9783 in the New York session. Looking ahead, Tuesday sees the release of Nationwide consumer confidence with markets expecting a slightly better figure of 86 (Previous: 85)

• The Australian Dollar (AUD) gained against the USD following a buoyant figure for February Retail Sales, released at 0.9% (Forecast: 0.4%), added further cause to a RBA rate hike on Wednesday. Overall, the AUD traded within a range of a low 0.8084 and a high of 0.8181 before closing the day at 0.8164 in the New York session. Looking ahead plenty of attention will be placed on the release of Februarys Trade Balance as the last key data release before the RBA call rate on Wednesday. Economists expect a further widening of the trade deficit to -1200 million.

• The South African Rand (ZAR) drifted weaker on Monday as gold fell but the currency held within a narrow range against the dollar, propped up by another good performance on the local stock market. Overall the ZAR traded within a range of a low 7.2270 and a high of 7.2875.

• Gold (XAU) rose in response to a weaker Dollar. Gold rose by US$2.50 an ounce to US$671.50.