Australian FOREX Daily Outlook 07/06/2007

Buoyant Aussie economic growth sees an 18 year high for the AUD. ECB and RBNZ increase rates. BoE rate announcement today, along with Aussie unemployment rate.

CURRENCY TRADING SUMMARY –07 JUNE 2007 (00:30GMT)

• U.S. Dollar Trading (USD) was mixed against other majors on Wednesday rebounding against the Euro in particular. With little data released out of U.S., the dollar was governed by other markets and their respective releases. In U.S. share markets the NASQAQ fell by 24.05 points (-0.92%) whilst the Dow Jones also fell by 129.79 points (-0.95%). Crude oil rose by US$0.29 to US$65.90 a barrel. Looking ahead, little data is once again expected out for Thursday session as markets await the release of Friday’s Trade Balance.

• The Euro (EUR) slipped against the USD on Wednesday despite the ECB surprising no one, hiking rates by 25 basis points to sit at 4% as widely expected. With markets expecting such a move it was President Trichet’s press conference that disappointed as it failed to provide any further clear indication that rates would continue to rise beyond 2007. ECB President Trichet said liquidity remained ample and inflation risks remain tilted to the upside he added the ECB does not intend to alter its 2008 inflation forecast. Overall the EURUSD traded with a range of a low 1.3485 and a high of 1.3538 before closing the day at 1.3503 in the New York session.

• The Japanese Yen (JPY) gained against the dollar as U.S. major stock indices fell in the wake of soft global equity markets prompting investors to unwind Japanese funded carry trades. Overall, the USDJPY traded with a range of a low 120.87 and a high of 121.50 before closing the day at 121.08 in the New York session. Looking ahead, key data will be released in the form FX Reserves with the previous figure being released at 915.62 bln.

• The Sterling (GBP) edged slightly higher against the Euro on Wednesday, and held firm against the greenback ahead of the BoE rate announcement. In a poll held by Reuter’s analysts, 5 out of 58 economists felt that an increase of 25 basis points will materialize on Thursday, despite the recent BoE minutes indicated some members had voted for a 50 point hike. Overall, the GBPUSD traded with a range of a low 1.907 and a high of 1.9958 before closing the day at 1.9927 in the New York session. Looking ahead, the BoE rate announcement is scheduled for Thursday with market expectations that cash target will remain unchanged at 5.50% despite the central banks ability to surprise.

• The Australian Dollar (AUD) continued to climb reaching 18 year highs following buoyant economic growth data. GDP moved back above its 15 year trend (3.6% p.a.) as the figure came in better than expected at 1.6% q/q (forecasted 1.2%). As a result the AUD was subject to plenty of buying support despite the RBA’s decision to keep rates on hold at 6.25% earlier in the day. Overall, the AUDUSD traded with a range of a low 0.8378 and a high of 0.8435 before closing the day at 0.8405 in the New York session. Looking ahead, the unemployment rate for the month of May is scheduled for release today with expectations that the figure will remain unchanged from the previous month at 4.4%. In other news, the RBNZ is scheduled for a rate decision today with many markets expecting rates to remain on hold at 7.75%. UPDATE: RBNZ Rate Announcement: 8.00% (25 point rate hike)

• The South African Rand (ZAR) weakened versus the dollar, flirting with the key 7.20 level as market nervousness prevailed ahead of the central bank’s interest rates verdict on Thursday