Australian FOREX Weekly Outlook 05/02/2007

last week’s currency trading review

The Dollar experienced a heavy week with plenty of economic data being made public. Initially a quiet beginning to the week, a significant increase was seen on Wednesday with the GDP (up 0.5%), Chicago PMI, and the much anticipated FOMC rate decision (unchanged) being released. The trend continued through to Thursday with further market moving statistics in the form of Core PCE (up 0.1%) and ISM manufacturing (49.3, down from 51.4), whilst Friday markets were also governed by the release in Non-farm Payrolls (111K, down from 167K) and the Unemployment rate (4.6%, up 0.1%) for the month of January. With conflicting data indicating strong economic growth, yet the likelihood of inflationary pressures receding, the USD was down against all other majors. The Euro experienced a strong week, breaking the psychological level of 1.3000 late in the week. With the Eurozone releasing figures regarding CPI (1.9%, unch.) and Unemployment rate (down 0.1%) on Wednesday, Manufacturing PMI (down 1.0%) on Thursday and the PPI on Friday. Although plenty of attention was paid to these figures, markets were often moved by accompanying statements made by officials. In specific, concerns regarding the JPY weakness which is thought to be addressed at the upcoming G7 summit held on 9-10 February. The Euro closed last week at 1.2966 having started the week at 1.2954. The Japanese Yen once again had a volatile week due to the release of poor economic data in the shape of Retail Sales for the month of December. Tuesday saw that trend continue with the release of Unemployment rate, Industrial Production and Overall Household Spending (down 1.9%). However the Yen experienced some support with the US Treasury secretary stating Henry Paulson claiming he was watching the Yen weakness ‘very, very closely’, causing plenty of investors to unwind bets against the JPY. As was previously mentioned that the Eurozone was directly concerned with the JPY weakness, it was revealed that it would not receive support from the US in the upcoming G7 summit. The JPY closed last week at 121.06 having started the week at 121.94. The GBP had a relatively quiet week in terms of data with only the release of Mortgage Approvals (9.5 bln, up 0.2 bln) and the PMI Manufacturing Survey (up 0.8) being the key figures. The GBP closed last week at 1.9674 having started the week 1.9592. The AUD saw a worse than expected trade balance number coming out at -1.336 billion worse than the expected -1 billion. The AUD closed last week 0.7745 having started the week at 0.7713.

The forex trading week preview

In the States following a heavy week in terms of economic data, the US sees a much quieter week scheduled, with Non-Manufacturing ISM set for release on Monday. As it seems the spotlight is shifting from the US to the Eurozone in the upcoming week. In other news, markets will pay significant attention to the G7 summit held in Essen, Germany on the 9-10 of February. With the lead up signaling conflicting reports as to whether the JPY weakness will be a key point of discussion. It is expected that the Euro zone will address the issue but are unlikely to receive any support from the US. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone will be the region of interest in the lead up to the G7 meeting beginning on Friday. Key economic data is scheduled for release starting on Monday with PMI for services being made public. The Figures for Retail Sales for the month of December are out on Tuesday whilst Thursday finds the ECB announcement on interest rates. In the UK also sees some key data release with BRC Sales Monitor out on Tuesday for the month of January. Thursday finds the BoE announcement on interest rates. On Friday leading into the G7 meeting, the UK will make public the Trade Balance for the month of December. We will provide our previews and reviews of these data releases in the daily summary.

In Japan after a very busy fortnight, a quiet week is expected in terms of economic data. However plenty of market interest is expected to surround JPY as the G7 summit looms. Thursday sees the release of the Private Machinery Orders for the month of December. We will provide our previews and reviews of these data releases in the daily summary.

In Australia a relatively heavy data week is expected with Retail Sales on Monday. The RBA will make a decision on interest rate (Tuesday) whilst Thursday sees Unemployment rate for the month of Jan are made public. We will provide our previews and reviews of these data releases in the daily summary.