Australian FOREX Daily Outlook 25/05/2006

MARKET SUMMARY –25MAY06 (05:00GMT)

• The Dollar retreated during the overnight session against major currencies after the German IFO index came in better than forecasters expected. Forecasters were expecting a level of 105 as opposed to 105.6 released last night, which is only a marginal fall from the all time high of 105.9. However, the dollar did rally towards the end of the overnight session buoyed by better than expected new home sales figures of almost 1.2million versus the expectation of a fall to 1.15 million, the highest level for the year. Although durable goods surprisingly fell by 4.8% in April (versus expectation of -0.2%), the market seemed to focus more on the positive data from new home sales and the minutes of the April BoJ meeting which showed they agreed to leave interest rates as they are. In other markets, the Dow Jones index swung 70 points up and down before finishing 19pts ahead, while the NASDAQ rose by 10pts. Crude oil fell sharply in the overnight session with fears of an economic slowdown and interest rate hikes playing on the mind of the market. Crude oil finished US$1.90 down to US$69.86 a barrel. Looking ahead, US GDP and existing home sales are due out later today.
  

• The Euro traded in a range of 1.2731 to 1.2890, before closing at 1.2753 in the New York session. On the data front, the German IFO index remained strong in May, decreasing slightly to 105.6 from an all time high of 105.9 the month before as analysts expected a fall to 105.
  

• The Japanese yen traded in a range of 111.64 to 112.96 versus the dollar, before closing at 112.93 in the New York session. On the data front, the minutes of the BoJ meeting in April were released showing the general consensus that interest rates should remain where they are.
  

• The Sterling traded in a range of 1.8654 to 1.8862, before closing at 1.8685 in the New York session. On the data front, the UK Q1 GDP is due out later today.
  
• The Aussie traded in a range of 0.7492 to 0.7560, before closing at 0.7533 in the New York session. On the data front, the housing price index rose 1.0%.
  

• Gold recorded its biggest one-day fall since 1993, falling 5.6% or US$36.20 to US$637.50 an ounce. This volatility was seen across the base metal and precious metal markets with copper falling 7.5%.