Australian FOREX Daily Outlook 09/01/2006

MARKET SUMMARY – 09/01/06(03.00GMT)

• The Dollar continued to weaken on Friday after a smaller than expected payrolls result. US sharemarkets posted solid gains as well with key indexes lifting to 4 year highs. The mixed jobs report watered down expectations of rate hikes. The Dow Jones rose by 77pts and the technology focused NASDAQ rose by 29pts. US non-farm payrolls (employment) rose by 108,000 in December, short of market forecast centered on a rise of 200,000 jobs. However the November result was revised higher from a gain of 215,000 jobs to a 305,000 rise. Unemployment fell from 5.0% to 4.9% in December. There are no major data releases scheduled in the States today.

• The Euro rose from 1.2082 to 1.2174, before closing in New York at 1.2145. Eurozone data was in line with expectations and the rally was caused by the weaker than expected payroll data. German November industrial production declined by 0.4% m/m vs. a -0.3% consensus. There are no major releases scheduled in the Eurozone today.

• The Japanese yen rose sharply from JPY116.28 per US dollar to JPY114.22, before closing in New York near JPY114.40. BOJ Governor Fukui played down prospects of an imminent end to quantitative easing, saying that there was still “same way to go”. The Japanese yen strengthened sharply as short yen positions continue to be unwound.

• The Sterling rose against the dollar to its highest in more than two weeks after the release of weaker than expected US employment data. The Sterling rallied to the day-high of US$1.7718 and went higher against the EUR, recovering from a five-month low of 69.15 on the previous day. The Sterling closed around 1.7700 in New York.

• The Aussie dollar rose from 0.7448 to 0.7552, before closing in New York near 0.7535. Today in Australia, retail sales fell 0.1 percent in November, confounding forecasts of a 0.3 percent gain and reinforcing market expectations for steady interest rates.The Australian dollar briefly dipped as low as $0.7514 following weaker-than-expected retail sales data, but quickly rebounded.

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