Australian FOREX Daily Outlook 24/04/2007

USD continues to show signs of recovery. Poor Aussie PPI does little to move the currency ahead of key CPI release.

CURRENCY TRADING SUMMARY –24 APRIL 07 (23:30GMT)

• U.S. Dollar Trading (USD) gained across the board yesterday in a relatively minimal data day to show some slight recovery from last weeks sell-off. Despite gains, many economists said sentiment on the greenback remained negative on a growing view that the Federal Reserve may have to cut U.S. interest rates at least once this year to stimulate a slowing economy. In US share markets, the NASDAQ dropped by 2.72 points (-0.11%) whilst the Dow Jones also fell 42.58 points (-0.33%). Crude oil rose by US$2.58 a barrel to US$65.96. Looking ahead, markets are confident that the slowing housing sector will be confirmed today with Existing Home Sales forecasted at 6.42 mln, down on the previous 6.69 mln.

• The Euro (EUR) experienced sideways trading with little data released out of the Eurozone. Despite commentary by ECB Vice-President Papademos, who confirmed that the Central Bank was likely to lift rates to 4.0% in June. Overall, the Euro traded with a range of a low 1.3547 and a high of 1.3607 before closing at 1.3572 in the New York session. Looking ahead, the Current Account out of the Eurozone is expected to be released at 1.4 bln (Previous: 2.7 bln). Furthermore, Industrial Production will also be made public with expectations awaiting a 1.1% figure (Previous: -0.2%)

• The Japanese Yen (JPY) An upgrade by Standard and Poor’s of Japan‘s sovereign rating to reflect the country’s improving fiscal and economic conditions boosted the yen. The yen, however, trimmed gains after Vice-Finance Minister Hideto Fujii said Japan was not considering setting up an investment body for managing foreign exchange reserves as had been reported. Overall, the JPY traded with a range of a low 118.23 and a high of 119.04 before closing the day at 118.59 in the New York session.

• The Sterling (GBP) dipped below the 2.0000 level, as last weeks 26 year high looks to diminish. Yet the GBP did find support on further speculation that price pressures will be accompanied by a BoE rate increase in the near-term. Overall, the GBP traded within a range of a low 1.9973 and a high of 2.0061 before closing the day 2.0009 in the New York session.

• The Australian Dollar (AUD) saw the figure for PPI, released at an unchanged figure of 0.0% (Previous: 0.2%). Although initially causing a minor sell-off, the AUD soon found support ahead of the CPI data released on Tuesday. Overall, the AUD traded with a range of low 0.8317 and a high of 0.8377 before closing the day at 0.8333 in the New York session. As previously mentioned, markets will be eagerly awaiting the release of the CPI data today, as its relevance on an RBA rate decision remains prominent. Analysts are confident that the figure will be released at 0.6%, stronger than the previous -0.1% adding to a cause of further monetary tightening.

• The Swiss Franc (CHF) was slightly stronger against the dollar and the Euro on Monday, ahead of a speech from Swiss National Bank board member Philipp Hildebrand on Tuesday and key economic data due out later this week. Overall the CHF traded with a range of a low 1.2058 and a high of 1.2129 before closing the day at 1.2096 in the New York session.

• The South African Rand (ZAR) eased slightly on Monday, but was still in sight of a 3-1/2 month peak as strong metals prices and positive emerging market sentiment continue to support the currency.

• Gold (XAU) although a broadly stronger USD weighed on Gold, losses were minimized by a rise in Oil, Overall Gold fell by US$1.60 an ounce to US$694.20