Australian FOREX Daily Outlook 11/05/2007

AUD rallies on surprising Unemployment rate, ECB rates unchanged as BoE hike. USD rebounds significantly on Paulson comments. U.S. PPI and Retail Sales released.

CURRENCY TRADING SUMMARY –11 MAY 07 (23:30GMT)

• U.S. Dollar Trading (USD) gained across the board despite initially losing ground on the back of a weaker trade balance figure showing a further widening of the trade balance to – 63.89 bln (Prior: – 57. 89 revised higher). However the greenback did well to shrug of the data as earlier investors trimmed bearish bets on the on the greenback after key central bank meetings this week, pushing the USD to a 1 month high against the Euro. Aided by comments from U.S Treasury Secretary Paulson that a strong dollar was in the interest of the U.S, also helped the USD to rally gather momentum. In U.S. share markets, the NASDAQ fell by 42.6 points (-1.65%) whilst the Dow Jones also fell by 147.74 points (-1.10%). Crude oil rose by US$0.26 a barrel to US$61.81. Looking ahead the data continues to be released out of the U.S. with Core PPI for the month of April m/m with analyst’s expectant of a figure 0.2% up from the previous 0.0%. Furthermore, Retail Sales for the month of April will also be released Friday (Forecast: 0.4% Prior: 0.4%)

• The Euro (EUR) showed little reaction after ECB president Trichet stressed the need for “strong vigilance” to ensure stable prices in the Euro Zone. Although the ECB decided to keep interest rates unchanged on Thursday, as expected, markets shrugged off Trichet’s use of the word “vigilant” which usually precedes an interest rate increase, as the market had widely expected him to telegraph such a move in June. Overall the Euro slid against the USD trading with a low 1.3465 and a high of 1.3564 before closing the day at 1.3483 in the New York session.

• The Japanese Yen (JPY) strengthened on Thursday, despite Secretary Paulson comments on the USD, causing the pair to reach highs of 120.54. In other news, the EURJPY fell by 0.4% from recent highs to touch 161.72. Overall the 119.83 and a high of 120.54 before closing the day at 119.87

• The Sterling (GBP) as forecasted the BoE increased rates 5.5%, yet the GBP eased on the back of a broadly stronger USD. Overall the GBP traded with a low of 1.9773 and a high of 1.9962 before closing at 1.9962 in the New York session.

• The Australian Dollar (AUD) rallied early in the Asian session as Unemployment came in better than expected at 4.4% (Forecast: 4.5%) to reach the lowest level in 32 years. As a result, markets were initially caught by surprise causing the AUD to break through 0.8300 levels, before pairing its gains on the back of a broadly stronger USD. Overall the Aud traded with a range of a low 0.8274 and a high of 0.8334 before closing the day at 0.8278 in the New York session.

• The Turkish Lira (TRY) weakened on Thursday as USD strengthened, as well as reports that political risk may cloud the nation economic outlook.

• Gold (XAU) fell by US$15.5 an ounce to US$667.00 as the USD rebounded strongly on Thursday. .