Australian FOREX Daily Outlook 21/02/2007

CURRENCY TRADING SUMMARY –21 FEBRUARY 07 (23:30GMT)

• U.S. Dollar Trading (USD) following a slow start to the week due to a public holiday, on Tuesday the US markets experienced a quiet day of trading on the back of little key data release. The dollar was mixed against all other majors recovering from a six-week low against the Euro. In US share markets, the NASDAQ rose by 16.73 points (0.67%) whilst the Dow Jones also rose by 19.07 points (0.15%). Crude oil dropped slightly by US$0.96 a barrel to US$58.90. Looking ahead, in what will be a very quiet week for the US key events risks surround todays release of Core CPI data with expectations at 0.20% higher than the previous 0.10%. In other news, FOMC minutes of the Jan 31 meeting will be made public with investors paying key attention to any indication of future Interest rate decisions.

• The Euro (EUR) surrendered gains as US investors returned following a long weekend. Overall, the Euro traded within a range of a low 1.3130 and a high 1.3190 before closing the day at 1.3144 in the New York session. Looking ahead plenty of interest will surround the Eurozone with the release of the Current Account. Markets are expecting a better figure than the previous – 2 bln coming in at – 1 bln.

• The Japanese Yen (JPY) fell for the third day against the Dollar and Euro on Tuesday as investors concededthat an interest rate hike by the Bank of Japan is unlikely to curb the selling of the Japanese currency. Overall, the USDJPY traded within a range of a low 119.55 and a high of 120.35 before closing at 119.96 in the New York session. Looking ahead the much anticipated BoJ interest rate announcement is scheduled for today. While investors are divided on whether the BoJ will lift borrowing costs to a decade-high of 0.5 percent on Wednesday, they increasingly agree the yen will remain popular to fund the carry trade.

• The Sterling (GBP) strengthened slightly following the previous day’s six week lows, largely on the back of strong housing data. Coming after a run of relatively soft housing market data, the numbers reignited expectations for another BoE rate hike in coming months, perhaps even as soon as March. Overall, the GBP traded with a range of a low 1.9480 and high of 1.9577 before closing at 1.9552. Looking ahead the BoE MPC minutes is released today with attention on any indications of future rate decisions.

• The Australian Dollar (AUD) had little data, a cause for sideways trading. Overall, the AUD traded in a range of a low 0.7851 and a high of 0.7874 before closing at 0.7862. Looking ahead with little data all week, the RBA Governor Stevens inaugural speech to parliament may cause some interest.

• Gold (XAU) dropped by US$11.10 an ounce to US$661.70, on the back of weaker oil prices and a stronger USD.