Australian FOREX Weekly Outlook 07/05/2007

Soft Non-Farm Payrolls ends slight USD reprieve. Big Week ahead for Interest Rate Announcements, with ECB, BoE and FOMC all scheduled

07/05/07

last week’s currency trading review

The Dollar rallied for three consecutive sessions last week as Manufacturing and Services ISM came in surprisingly strong, which gave support to the Dollar. Yet bearish sentiment returned on Friday as a significantly worse off figure in the shape of Non-farm Payrolls gave further indication that the slowing economy was now beginning to affect the labour market, recently experienced by the housing sector. The Euro remained steady for much of the week despite a mid week rally for the greenback with ECB officials stating on Wednesday that they were not concerned with the recent EUR strength. Such comments gave further support to rate hike materializing during the June meeting. The Euro closed last week at 1.3597 having opened at 1.3651. The Japanese Yen saw markets closed for much the week due to Golden week Holidays. The JPY opened last week at 119.53 and closed at 120.13. The GBP began the week with house prices increasing by 6.8% for the month of April the fastest rate since June 2003, yet did little to hinder speculation that the BoE will increase interest rates to 5.5% in the coming week. Added to this was a decline in Mortgage Approvals, with speculation of an interest rate hike starting to take its toll on the Housing sector. The GBP closed last week at 1.9931 having opened at 1.9994. The AUD experienced a volatile week with the RBA deciding to keep interest rates unchanged at 6.25%. Furthermore, the AUD took a tumble on Friday as trade balance was shown to have widened significantly at -1.6 bln, largely attributed to a drop by -4% in exports due to recent strength in the AUD.

The forex trading week preview

In the States with plenty of speculation surrounding the slowing economy, plenty of focus will be on the FOMC meeting (Wednesday), undoubtedly the key piece of data as to whether the Federal Reserve decides to loosen policy in the hope to rejuvenate the economy. In other release Trade Balance (Thursday), PPI and Retail Sales (Friday) are sure to generate plenty of interest as well. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone is scheduled for a heavy data week with the ECB too scheduled to make an announcement on interest rates (Thursday). Prior to that ECB President Trichet will be speaking as markets await any early indication of policy outcomes. In the UK although a market holiday will begin the week, plenty of production data is expected Industrial and Manufacturing both out on Thursday. The BoE is also scheduled for an interest rate announcement on Thursday. We will provide our previews and reviews of these data releases in the daily summary.

In Japan is expected to ease into the week following last weeks holidays with only the BoJ minutes of the March meeting released on Monday expected to cause any interest. We will provide our previews and reviews of these data releases in the daily summary.

In Australia will once again have a heavy week scheduled, starting with Retail Sales and the Federal Budget out on Tuesday. House Prices (Wednesday) and Unemployment Rate (Thursday) will also cause some interest. We will provide our previews and reviews of these data releases in the daily summary.