Australian FOREX Daily Outlook 14/05/2007

USD eases on the back of poor Retail Sales and PPI. AUD ends the week above 0.8300 levels. UK to release PPI whilst EZ release Industrial Production.

CURRENCY TRADING SUMMARY –14 MAY 07 (00:30GMT)

• U.S. Dollar Trading (USD) eased against a basket of currencies to end the week on Friday as U.S. retail sales surprised coming in on the soft side. With market expectations that the figure would be a growth of 0.4%, the actual number was released unchanged at 0.0%, bolstering views that the economy was losing plenty of its momentum. Added to this was a benign Core PPI number which also came in below consensus at 0.0% (Forecast: 0.2%). Although the USD was subject to plenty of technical trading, the dollar did however receive some support (capping its losses) on the back of investor expectations that a rate cut by the Fed would not emanate in the near term. In U.S. share markets the NASDAQ rose by 28.48 points (+1.12%) whilst the Dow Jones also rebounded gaining by 111.19 points (+0.84%).

• The Euro (EUR) rallied against the dollar on Friday, largely attributed to weak U.S. data. Following the ECB decision the previous session to keep rates on hold, the Euro regained some of its losses. Overall the EUR traded with a range of a low 1.3462 and a high of 1.3530 before closing the day at 1.3527 in the New York session. Looking ahead, Industrial production out of the EZ is scheduled for release on Monday as economists expect a figure of 0.3% (Previous: 0.6%). Markets will pay attention to such data release as to whether the economic growth of the region warrants a rate hike in June as widely expected.

• The Japanese Yen (JPY) ended a quiet week by its standards of data, easing across the board as investor’s appetite for risk was slightly renewed, seen by the EURJPY pair reaching 162.42 up 0.5%. The Yen had risen earlier in the session, tracking the Chinese Yuan, which hit a post revaluation high on speculation about an interest rate hike in China, the Yuan rose as high as 7.6750.Overall, the JPY traded with arrange of a low 119.47 and a high of 120.23 before closing the week at 120.13 in the New York session. Looking ahead the current account will be released to on Monday with analysts awaiting a figure of 2868 bln JPY (Prior: 2417.5 bln).

• The Sterling (GBP) regained some of its previous session losses on technical trading due to minimal data release out of the UK. With recent revelation of Prime Minister Blair’s forthcoming retirement from power, expectation of a smooth change over to the Finance minister are prominent showing no effect to the GBP. Overall the GBP traded with a range of a low 1.9764 and a high of 1.9846 before closing the day at 1.9822 in the New York session. Looking ahead, Core PPI will be made public with expectations that a figure of 0.3% will materialize (Prior: 0.4%) as well as the release of industrial production for the month of March to be confirmed at 0.3% (Prior: 0.6%).

• The Australian Dollar (AUD) regained some of its previous session losses despite a positive Unemployment Rate number, largely on the back of weak U.S. data, and a renewed appetite for high yielding currencies. Overall the AUD traded with a range of a low 0.8231 and a high of 0.8329 before closing the day at 0.8315 in the New York session.

• The Turkish Lira (TRY) continued to suffer from the political uncertainty as well as trends of the dollar and Euro. The Lira strengthened from 1.3500 to 1.3410

• Gold (XAU) traded in a narrow range gaining moderately. Gold rose by US$5.30 an ounce to US$672.30