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UK PPI boosts outlook for economy, as G7 remain cautious on global growth

CURRENCY TRADING SUMMARY – 12 FEBRUARY 2008 (00:30GMT)

U.S. Dollar Trading (USD) was generally firmer in the US session against a number of majors, as risk aversion prompted a broad sell off in high yielder’s. In what was a quiet day for data, ministers and central bankers of the seven rich nations ended a week long meeting in Tokyo with a statement that “downside risks persist”, including the U.S. housing slump and tighter global credit conditions.  The group estimates banks worldwide will suffer write-downs of $400 billion, German Finance Minister Peer Steinbrueck said. Financial institutions have marked down about $146 billion of losses since the start of 2007. In U.S. share markets the NASDAQ was up by 45.16 points (0.51%) whilst the Dow Jones was also up by 57.88 (0.48%). Crude oil rose by US$1.78 a barrel to US$93.55.   

The Euro (EUR) capped its gains versus the dollar as much of the emphasis being placed on remarks from monetary policymakers. The EURUSD traded with a low of 1.4482 and a high of 1.4577 before closing the day at 1.4517.

The Japanese Yen (JPY) rose the most this month against the dollar after the Group of Seven nations warned of further financial-market turmoil, spurring investors to reduce holdings of higher-yielding assets bought with loans from Japan. Japan's currency extended its gains versus the Euro and dollar this year to at least 4.6 percent after the G-7 in a meeting this weekend estimated global banks will write down $400 billion because of losses on U.S. sub-prime mortgages. Overall the USDJPY traded with a low of 106.34 and high of 107.65 before closing the day at 106.97 in the New York session.

The Sterling (GBP) held largely steady against the Dollar and Euro paring earlier looses after a surge in wholesale UK inflation cooled forecasts on how much the BoE will cut interest rates. Much of the sentiment was boosted by UK PPI data, coming in at 0.8% for the month of January, well above the forecasted 0.3%. Overall the GBPUSD traded with a low of 1.9404 and a high of 1.9529 before closing the session at 1.9497 in New York. Looking ahead, CPI and Retail Sales figures will prove key to any outlook to the UK economy.   

The Australian Dollar (AUD) rallied on hawkish RBA monetary policy statements forecasting that inflation will remain above the comfort band of 2% - 3% until 2010, prompting traders to price further rate hikes by the RBA. Overall the AUDUSD traded with a low of 0.8943 and a high of 0.9058 before closing the day at 0.9035 in the New York session.   

Gold (XAU) futures rose to a one-week high after energy costs climbed, boosting the appeal of the precious metal as a hedge against inflation. XAU traded with a low of 916.35 and a high of 926.90.

TECHNICAL COMMENTAR

Euro – 1.4510

Initial support at 1.4440 (Feb 7 low) followed by 1.4366 (Jan 22 reaction low). Initial resistance is now located at 1.4597 (Feb 11 high) followed by 1.4637 (38.2% retracement of the 1.4956 to 1.4440 decline).

Yen – 106.90

Initial support is located at 105.71 (Jan 31 low) followed by 104.97 (Jan 23 low). Initial resistance is now at 107.66 (Feb 11 high) followed by 107.89 (Jan 28 high)

Pound – 1.9505

Initial support at 1.9403 (Feb 11 low) followed by 1.9389 (Feb 7 low). Initial resistance is now at 1.9530 (Feb 11 high) followed by 1.9624 (Feb 7 high)

Australian Dollar – 0.9035

Initial support a 0.8916 (Feb 8 low) followed by 0.8875 (Feb 7 low). Initial resistance is now at 0.9060 (Feb 11 high) followed by 0.9102 (Feb 4 high)

Gold – 923.00

Initial support at 907.75 (Feb 8 low) followed by 897.00 (Feb 7 low). Initial resistance is now at 927.31 (Feb 11 high) followed by 936.80 (Feb 1 trend high)