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Video for March 3rd, 2008 (3min 30 sec): Aussie Gains on Fundamental Data and Anticipation of Rate Increase

AUS Inflation Remains Elevated

Inflation in Australia continued to show elevated readings. The TDMI Inflation gauge was up 4% on the year. This pressures the central bank members to raise rates another 25 basis points in order to combat inflationary pressures. They will be meeting tonight.

AUS Company Profits and Manufacturing Improve

Operating profits for Australian companies recovered in the 4^th quarter, rising 3.9%. The 3rd quarter showed the first negative measure in 2 years. Manufacturing in Australia returned above the 50 boom-bust level in February, after it showed contraction in January.

AUD/USD - Aussie Regains Some Losses from Friday

 

The Aussie was higher against the Greenback, recovering a good portion of its losses from Friday. Traders may be expecting another hawkish statement from the Australian central bank. The pair hit some resistance above .94 and started retreating in afternoon NY trading.

EUR/AUD - Aussie Moves 200

 

It was a similar story for the Euro-Aussie pair, as the pair fell 200 pips in the Australian Dollar's favor overnight. It did not come close to last Friday's low. The New Zealand Dollar saw similar gains, though both the Aussie and Kiwi declined vs the Yen.

UK Manufacturing Performs Better Than Expected

In the UK, the manufacturing sector improved more than expected. This is welcome news as the indicator had been dropping the last couple of months while the UK experiences a slowdown.

SWZ Purchasing Managers Index Declines Slightly 

Switzerland on the other hand saw its purchasing managers index decrease, though the fall was in line with expectations. The indicator is a broader measure of economic activity, not limited to just manufacturing.

EUR Manufacturing Eases from January

European and German manufacturing eased from January. The Euro-zone PMI matched its preliminary estimate, while Germany's PMI beat expectations of a larger decline.

EUR Consumer Prices Stay Elevated

A preliminary estimate of inflation for February showed annual inflation staying steady at 3.2% in the Euro-zone.

US Manufacturing Slips to Contraction

The US also released its manufacturing index, which showed activity slipping into contraction. February's ISM index fell from 50.7 to 48.3. The silver lining is that economists had expected an even larger decline. Prices remained at high levels with 75% of respondents citing that they faced higher prices.

EUR/USD - Euro Sets New Record High Then Retreats

 

The Euro-Dollar pair hit a new record high at 1.5274, but those gains were quickly cut down following the release of the US manufacturing data and comments from ECB President Trichet. He stressed that a strong-dollar policy is "very important", as several European ministers spoke out about the effects the recent Euro rally will have on exports.

USD/JPY - Yen Strengthens on Carry Trade Pullback

 

The Dollar-Yen pair continued falling, reaching a low for the session near 102.60. It has dropped around 500 pips in the last 5 sessions. The yen is gaining as credit-market losses are prompting a pullback from carry trade.

Canadian GDP Falters

In Canada, GDP for the month of December slowed considerably, declining 0.7%. For the 4^th quarter, growth was an anemic 0.2%.

USD/CAD - Loonie Weakens After GDP Data

 

The news sent the US Dollar-Canadian Dollar pair higher. It has gained around 160 pips in the last two sessions, after falling decidedly in the Loonie's favor the first half of last week.

Upcoming Releases

Tonight, Australia will reveal retail sales data and its current account, and the Reserve Bank of Australia is expected to raise rates.

Overnight, Switzerland will unveil data on consumer prices and GDP. The euro-zone also posts GDP data along with its producer prices. Tomorrow morning, the Bank of Canada will will be expected to cut rates by 25 basis points to bolster the economy.