Australian FOREX Daily Outlook 27/03/2006

MARKET SUMMARY –27MAR06 (05:00GMT)

• The recent Dollar strength was halted and sharply reversed on Friday night, after poor new homes sales data. US new homes sales fell by 10.5% to 1.080 million in February, the largest fall in nine years. The market had expected 1.208 million new home sales. New orders for US-made durable goods rose by 2.6% in February, well above the 1.0% increase expected by the market. However, when a 13.4% surge in transportation orders is excluded, orders fell by 1.3%, well below expectations. In other markets, US shares rose on Friday as data suggests the Federal Reserve might stop raising rates sooner than expected. The Dow Jones closed up 10pts while the NASDAQ was up by 13pts. Crude oil prices rose on Friday by US35 cents to US$64.26 a barrel.

• The Euro traded up from 1.1952 to a high of 1.2047, before closing at 1.2035 in the New York session. On the data front, Germany’s CPI (and core CPI) rose by 0.1% in March, giving an annual rate of 1.9%. The annual rate is now at its lowest since August 2005 and supports the views of some Bundesbank officials that the inflation data remains controlled and may not justify significant ECB rate rises in coming months.ECB President Trichet is still keen on the view that inflation risks warrant tightening bias a move to 3% is priced in fully by the markets but it most probably is data dependent.
  
• The Japanese yen traded in a range of 117.40 to 118.50 versus the dollar, before closing at 117.50 in the New York session. In Japan on Friday, nationwide department sales rose by 0.5% in February. It follows a fall of 0.4% in January and adds to the momentum in Japanese economic activity.

• The Sterling traded up from 1.7310 to a high of 1.7445, before closing at 1.7425 in the New York session.

• The Aussie traded in a range of 0.762 to 0.7120 versus the dollar, before closing at 0.7085 in the New York session.

• Gold rose strongly overnight following a weaker greenback. Gold rose by US$9.50 an ounce to US$560.30.