Australian FOREX Daily Outlook 03/05/2007

USD rallies across the board with buoyant factory orders. RBA keep interest rates unchanged at 6.25%. US Jobs data the theme to end the week.

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

• U.S. Dollar Trading (USD) rallied across the board yesterday as strong data in the shape of factory orders cast doubts as to how slow the US economy was growing. Previous day’s data strength in manufacturing ISM also supported the rally, as the result indicated activity had grown at its quickest pace in over a year. In US share markets the NASDAQ grew by 26.31 points (1.04%) whilst the Dow Jones also rose by 75.74 points (0.57%). Crude oil fell by US$0.72 a barrel to US$63.68. Looking ahead, Non-manufacturing ISM is made public on Thursday ahead of Fridays Job data. Economists are forecasting a figure of 53.0 slightly higher than the previous 52.4.

• The Euro (EUR) climbed above the 1.3600 levels with reports revealing that the EZ officials had not seemed phased by the recent EUR strength. Overall, the Euro traded with a range of a low 1.3560 and a high of 1.3613 before closing the day at 1.3597 in the New York session. Looking ahead PPI out of the EZ is expected to show a slight decline to 2.8% from the previous 2.9%.

• The Japanese Yen (JPY) slid early against the USD due to thin trading, briefly touching a two-month high before investors trimmed profits that the greenback could tumble on Friday’s jobs data. Overall, the JPY traded with a range of a low 119.47 and a high of 120.28 before closing the day at 120.12 in the New York session.

• The Sterling (GBP) slid on the back of a revived dollar. British Mortgage approvals in March fell to their lowest level in a year, with the Bank of England saying the number of approvals fell to 113,000 from 117,000 in February. Although economists still expect interest rates, currently at 5.25 percent, will rise twice to 5.75 percent by the end of the year, weaker housing data on the margins cooled confidence on the second hike. Overall, the GBP traded with a range of a low 1.9871 and a high of 1.9998 before closing the day at 1.9895 in the New York session. Looking ahead, services PMI is set for release with expectations at 57.5 slightly down on the previous 57.6.

• The Australian Dollar (AUD) saw the RBA keep interest rates on hold as markets paired gains on the currency early Asian session. With speculation over recent months that a rate hike 25 basis points would materialize, last weeks poor PPI and CPI numbers hindered on tightening bias, as rates were kept unchanged at 6.25%. For much of the European session the AUD traded in a very tight range of 30 pips. Overall, the AUD traded with a low of 0.8220 and a high of 0.8283 before closing the day at 0.8258 in the New York session.

• Gold (XAU) fell by US$2.20 an ounce to US$675.10 on the back of a broadly stronger dollar.