Australian FOREX Daily Outlook 13/06/2007

Bonds reach 5 year highs giving further support to the USD, GBP rebounds on rate increase speculation by Gov King. US Retail Sales released today.

CURRENCY TRADING SUMMARY –13 JUNE 2007 (00:30GMT)

• U.S. Dollar Trading (USD) rallied against the Euro for the fifth consecutive session to touch two month highs, as the greenback remained buoyed by an increase in treasury yields. Former Federal Reserve Chairman Alan Greenspan made comments on Tuesday as to being unsure of the rise in bond yields being cyclical or an indication of a long term trend. In U.S. share markets, the NASDAQ fell by 22.38 points (-0.87%) whilst the Dow Jones also fell by 129.95 points (-0.97%). Crude oil eased also by US$0.62 a barrel to US$65.35 as data showed that gasoline supplies had risen for the sixth straight week. In data ahead, Wednesday will see the release of May’s Retail Sales figures, with markets expecting a figure of 0.7% for the m/m, up from the previous 0.0% figure (Retail Sales Ex Autos).

• The Euro (EUR) eased once again against the USD on the back of a broadly stronger dollar. In data news, the Eurozone Industrial Production came in significantly worse than consensus for the month of April, down to -0.8% than the forecasted 0.2% (Previous revised higher to 0.5%). Overall the EURUSD traded with a range of a low 1.3312 and a high of 1.3370 before closing the day at 1.3316 in the New York session.

• The Japanese Yen (JPY) was relatively unchanged, subject to tight sideways trading in the absence of data release. Overall the USDJPY traded with a range of a low 121.60 and a high of 121.86 before closing the day at 121.76 in the New York session. Looking ahead. Japan is scheduled to release the Current Account for the month of April, with Economist forecasting a figure of 35.3% (Prior: 36.9%). UPDATE: Current Account at 50.3%.

• The Sterling (GBP) was subject to plenty of volatility on Tuesday as poor CPI numbers caused an initial sell off in the sterling, which had gained during the Asian session of trading. Although CPI for the m/m came in on expectations at 0.3%, it was a drop in the y/y figure from 2.6% to 2.5% (Prior: 2.8%) giving an indication that recent monetary tightening by the BoE was beginning to take effect with inflationary pressures receding. Yet the GBP soon found support with flat Retail Sales figures, and a narrowing of the Trade Balance from -7.05 bln, to -6.316bln for non-EU (Forecast: -7.0 bln). Cable was also supported by comments made by BoE Governor King said UK rates may need to rise again if capacity pressures, pricing intentions and inflation expectations remain elevated, diminishing earlier losses from a poor CPI y/y figure. Overall the GBPUSD traded with a range of a low 1.9689 and a high of 1.9783 before closing the day at 1.9763 in the New York session. Looking ahead, Unemployment rate is scheduled for release out of the UK on Wednesday with expectations that the figure will remain unchanged at 5.5% for the month of April.

• The Australian Dollar (AUD) eased on Tuesday on the back of a broadly stronger dollar. The AUD was subject to movements in the US session due to a lack of data. Overall the AUDUSD traded with a range of a low 0.8409 and a high of 0.8445 before closing the day at 0.8429 in the New York session. Looking ahead, Consumer Confidence will be released out of Australia with the previous figure at 7.5%. UPDATE: Consumer Confidence down -2.0% for June.

• The New Zealand Dollar (NZD) rallied on Tuesday following the RBNZ intervention on Monday, weakening its currency for the first time since the kiwi was floated in 1985. The NZD gained 0.1% yet investors remained cautious. However, the NZD still remained attractive for investors looking for high yielding currencies.

• The Czech Krown (CZK) fell on Tuesday, as Czech central bank (CNB) board member Robert Holman said that he sees no significant inflation risks in the economy after the CNB hiked rates in May by 25 basis points. Markets are still expecting the CNB to raise rates by another 0.25% to near 5 year high of 3%, possibly as early as July, to help control inflation pressures and curb household spending, which has been rising at its fastest rate in more than 3 years.

• Gold (XAU) paired off its Monday gains as investors in long positions took profit. Gold fell by US$5.90 an ounce to US$653.10.