Australian FOREX Weekly Outlook 19/02/2007

19/02/07

last week’s currency trading review

The Dollar experienced a very heavy data week post G7 summit, as normality resumed across markets. Trade Balance was released on Tuesday with the deficit further widening to -61.18 bln from the previous -58.20 bln. The trend continued throughout the week, with the volume of data increasing as Retail Sales was out on Wednesday, down to 0.3% from the previous 1.0%. Fed Reserve chairman Bernanke began his semi-annual two day address to congress on Wednesday indicating receding inflationary pressures, whilst on Thursday a contrasting stance was taken, with Bernanke suggesting the US economy may be in better state then first thought. Thursday continued to be a heavy data day for the US with Jobless claims made public at 326.25k worse than expected. Furthermore manufacturing data was also released on Thursday with the NY Fed Manufacturing coming a strong 24.35 (forecast: 10.00) whilst Industrial Production (-0.5) and the Philly Fed (0.6) both softer than the expected 0.0% and 4.0 respectively. TIC flows were also released on Thursday with the figure way down on the forecasted 72.00 bln coming in at 15.6bln. The trend continued well into Friday with further poor economic data out in the shape of Housing Starts down to 1.408 mln from the previous 1.642 mln for the month of December. Overall, ongoing poor data added to the notion that the USD has reached its peak with the Fed Reserve likely to cut rates in order to regulate the economy. The Euro experienced a fairly heavy data week with most of the key indicators released on Tuesday. The German ZEW survey came in lower than expected at 2.9 instead of the 5.0 predicted by analysts, GDP was up to 0.9% whilst Industrial production was also up 1.0% than the previous 0.2%. Friday trade balance for the Eurozone was released at 2.5bln with the previous revised higher at 5.1 bln. Overall the Euro rallied to close the week at 1.3136 having started the week at 1.3004. The Japanese Yen saw a very light data week yet continued to remain in the spotlight following the G7 summit. On Wednesday the Current account came in at lower than expected at 1.776.8 bln. Thursday saw the strongest Japanese GDP figures in almost three years coming in at 1.2% increasing the likelihood of a BoJ rate hike in there next meeting. As a result the Yen rallied on the back of investor buying, closing the week at 119.24 having started the week at 121.66. The GBP continued to slide last week despite strengthening following an unchanged rate of Unemployment at 5.5% (Wednesday). Tuesday’s poor CPI figure of 2.7% added to Friday’s Retail Sales figure of -1.8% attributed to the weakness in the Sterling. The GBP ended last week at 1.9500 having started at 1.9503. The AUD experienced a stable week although the RBA policy statements implied that inflationary pressures were receding (Monday) following their keeping interest rates unchanged as expected the week previous. The AUD closed last week at 0.7844 having opened at 0.7800.

The forex trading week preview

In the States following a heavy data week, the week ahead is considerably quieter as seen be by Presidents day on Monday constituting a market holiday. The key economic indicators will begin on Wednesday with the release of the core CPI. The only other event risk will also be on Wednesday with the FOMC minutes of the Jan 31 meeting. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone Wednesday finds the Current Account for the region made public for the month of December. In a light week Friday’s German IFO will be released and is perceived to be the only other event of interest. In the UK Rightmove House Prices for the month of January is out (Monday) whilst the BoE minutes will be made public on Wednesday. Thursday sees the release of the CBI Industrial Trends survey the second release of the GDP fourth quarter out on Friday. We will provide our previews and reviews of these data releases in the daily summary.

In Japan following strong economic data last week, plenty of interest will surround the interest rate announcement by the BoJ and whether a hike will materialize, accompanying statements will also be significant points of interest. The Trade balance is out on Wednesday. Finally Governor Fukui will be talking on Friday. We will provide our previews and reviews of these data releases in the daily summary.

In Australia a very quiet data week is expected with the RBA Gov Stevens will testify in his inaugural statement to parliament. We will provide our previews and reviews of these data releases in the daily summary.