Australian FOREX Daily Outlook 17/09/2007

Northern Rock, rocks the Sterling. Markets anticipate Federal Reserve rate announcement.

CURRENCY TRADING SUMMARY –17 SEPTEMBER 2007 (00:30GMT)

·U.S. Dollar Trading (USD) rebounded against a number of currencies to end the week as speculators entertained alternative outcomes of the much anticipated September 18 FOMC rate announcement. In recent times markets have been overly confident of a rate cut by 50 basis points, yet stable data on Friday indicated that the state of the U.S. economy was not as bad as first thought, hence persuaded investors views that the world’s largest economy may not be on the brink of a recession. Much of the notion was instigated by the difference in yield between two-year Treasuries and the comparable-maturity German bonds widening, making U.S. fixed-income assets more attractive. Further more, reports also showed a rise in Consumer Confidence (Michigan Survey) for the month of September coming in at 83.8. In other data, Current Account (Q2, at -190.8 bln) was released relatively on consensus whilst Retail Sales (m/m) was slightly down on forecast coming in at 0.3% (Forecast: 0.4%). In U.S. share markets the NASDAQ was up 1.12 points (+0.04%) whilst the Dow Jones was also slightly up at 17.64 points (+0.13%). Crude oil fell from its record highs on Friday, down US$0.99 a barrel to US$79.10. Looking ahead, key data to begin the week will be released in the form of NY Fed Manufacturing Survey, whilst Treasury Secretary Paulson and UK’s Chancellor Darling to speak ahead of Tuesdays’ rate announcement.

·The Euro (EUR) eased on a rebounding dollar as market confidence in a 50 bpt rate cut by the FOMC dwindled. In data specific news, the Euro gained little support from key inflationary measures, with Core CPI figures for the month of August out at 0.2% (Forecast: 0.1%). Overall the EURUSD traded with a range of a low 1.3845 and a high of 1.3895 before closing the day at 1.3865 in the New York session.

·The Japanese Yen (JPY) was flat to end the week despite a rebounding dollar. Overall the USDJPY traded with a range of a low 114.37 and a high of 115.39 before closing the day at 115.20 in the New York session. Monday sees a market holiday for Japan as thin trading is expected.

·The Sterling (GBP) tumbled in the early part of Friday Asian session following a report of Northern Rock Plc (Fifth Largest Mortgage lender in the UK) received the largest emergency funding from the BoE seen in the last 30 years. Following the fallout, the GBP tumbled to a 14 month low against the EUR whilst posting it steepest weekly decline in two years as market turmoil supported the unlikelihood of an interest rate hike by the BoE in the future. Overall the GBPUSD traded with a low of 2.0060 and a high of 2.0226.

·The Australian Dollar (AUD) was relatively flat to end the week as a rebounding USD had a more influencing effect on other majors. Overall the AUDUSD traded with a range of a low 0.8380 and a high of 0.8430 before closing the day at 0.8420 in the New York. session

·Gold (XAU) rose as investors continued to buy gold as an alternative to currencies boosting demand for precious metals. XAU traded with a range of a low 704.60 and a high of 717.00.