Australian FOREX Weekly Outlook 26/02/2007

26/02/07

last week’s currency trading review

The Dollar experienced a light data week as markets were closed on Monday following President’s day. As a result markets experienced plenty of sideways trading. Wednesday proved to be the key day for the US with the release of the Core CPI for the month of January coming in better than expected. With markets expecting an unchanged figure of 0.2% the actual came in slightly higher at 0.3%. This was despite reports of inflationary pressures receding, The Federal Reserve would not look to cut interest rates in the near term. Further highlighted by the minutes of the FOMC Jan 31 meeting where reports identified inflationary pressure to remain a ‘predominant concern’. The Euro experienced a fairly light data. Wednesday saw the Eurozone Current Account made public coming in at a better than expected figure of 2.3 bln rather than the forecasted – 1 bln. However with the previous revised higher to 0.9 bln (from -2.0 bln), such a positive figure did not have the desired effect on further Euro strengthening. In other news the German IFO business climate survey for the month of Feb was released on Friday coming in slightly softer than expected. With markets expecting a figure of 107.5 and the previous at 107.9 the actual figure came in at 107.0. Overall the Euro closed last week 1.3162 having opened at 1.3155 at the beginning of the week. The Japanese Yen experienced a very volatile week on the back of Wednesday’s interest rate announcement. With markets split as to the outcome of the meeting, The USDJPY slid down to 119.70 on the back of a rumored report by a Japanese television network that the BoJ would raise rates by 0.25%. Following the actual decision which saw the Interest rate reach a decade high of 0.5%, the USDJPY pair slid up as the carry trade phenomena remained. Hence investors believed that although a rate hike materialized, at the lowest levels of the G10 nations, the JPY still remained an attractive currency to fund carry trades. Overall the JPY closed last week at 121.03 having opened at 119.60. The GBP recovered last week to on the back of some relatively stable data. Rightmove House Prices for the month of January came in stronger than expected at 0.9% higher than the expected 0.2% on Monday. The BoE MPC minutes release on Tuesday showed a convincing 7-2 vote by members to keep interest rates on hold. As result the GBP dropped on the notion that a near term rate hike was highly unlikely. On Friday the GDP for the UK was confirmed at 0.8% as expected. Overall the GBP closed last week at 1.9634 having opened at 1.9499. The AUD experienced some strength following the RBA governor Stevens inaugural speech to parliament where he stated that the RBA would be more incline to a rate hike than a rate cut in the foreseeable future. Overall the AUD closed last week at 0.7918 having opened at 0.7886

The forex trading week preview

In the States following a light data week will see considerably heavier week starting with the release of Durable Goods Orders and consumer confidence both out on Tuesday. The volume of data continues to increase with the release of GDP Annualized (Q4, 2^nd release), Chicago PMI (Feb), New Home Sales (Jan) all out on Wednesday. Further more on Thursday Core PCE prices and Manufacturing ISM will also be made public. Friday the Michigan sentiment will be out. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone will see the release of key data beginning on Wednesday in the form of Consumer Confidence Unemployment Rate and Core CPI all scheduled for release. Further more on Thursday Manufacturing PMI and CPI will also be released. Finally on Friday the PPI for the month of January will be made public. In the UK Nationwide House prices will be out on Wednesday along with Gfk Consumer Confidence Survey for the month of February. On Thursday further key data will be mad public in the form of Manufacturing PMI and Mortgage Approvals. We will provide our previews and reviews of these data releases in the daily summary.

In Japan will begin its busy week on Monday with the release of the BoJ minutes from last weeks interest rate announcement. Tuesday the trend is set to continue in the shape of Industrial production and Retail Sales are out whilst Thursday finds the data for Housing starts. On Friday Unemployment rate, Household spending and Nationwide CPI are all due for release. We will provide our previews and reviews of these data releases in the daily summary.

In Australia New home sales is set for release on Tuesday, whilst Retail Sales and Current account balance are all due for release on Thursday. We will provide our previews and reviews of these data releases in the daily summary.