Australian FOREX Daily Outlook 18/05/2007

Buoyant U.S. data provides for a stronger dollar. Yields are given green light as BoJ keep rates unchanged.

CURRENCY TRADING SUMMARY –18 MAY 2007 (00:30GMT)

• U.S. Dollar Trading (USD) advanced broadly having recently reached a 1 week low. The greenback received support from Philly Fed survey which indicated an unexpectedly large rise in US business activity backing a view that interest rates will stay on hold for some time. In U.S. share markets, the NASDAQ fell by 8 points (-0.32%) whilst the Dow Jones fell by 10 points (-0.08%). Crude oil by US$2.31 a barrel to close at US$64.86 as production supply was further tightened on the gasoline market. Looking ahead, Michigan Sentiment is set for release with expectations of 86.7 (Previous: 87.1).

• The Euro (EUR) further eased against the USD for the second session running on the back of buoyant U.S. data. Overall, the EURUSD traded with a range of a low 1.3477 and a high of 1.3545 before closing the day at 1.3493 in the New York session.

• The Japanese Yen (JPY) further eased to reach a further three-month low against the Yen on Thursday. Following the BoJ’s decision to keep the interest rate on hold at 0.5% with Governor Fukui reiterating rates will only rise gradually. In other news, growth data in the form of GDP expanded below the expectations of 2.7% y/y, at 2.4%, pushing back rate hike expectations, boosting the appeal of higher-yielding currencies. Overall, the USDJPY traded with a range of a low 120.68 and a high of 121.37 before closing the day at 121.28 in the New York session.

• The Sterling (GBP) further eased on Thursday on the back of a stronger USD. Overall the GBPUSD traded with a range of a low 1.9734 and a high of 1.9791 before closing the day at 1.9744 in the New York session. Looking ahead, Retail Sales for the month of April will be released on Friday with economist expecting a figure of 0.6% m/m to be released higher than the previous 0.3%.

• The Australian Dollar (AUD) continued to ease on Thursday, trading technically with absence of key data. Overall the AUDUSD with a low of 0.8203 and a high of 0.8268 before closing the day at 0.8233 in the New York session.

• The Turkish Lira (TRY) weakened sharply in late trade on Thursday and stocks gave up some of the gains, weighed down by stronger than expected US data.

• Gold (XAU) continued to move lower falling by US$4.30 an ounce to US$657.20 extended by previous day losses, as investors sought to pair profits in long Gold positions and sharp losses in base metals. Gold reached a six week low.