Wednesday July 16, 2008 - 22:38:53 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report
Report Thursday 17 July 2008
quiet London morning the
overnight session heated up in New York trading. The
first news was a stronger than expected US CPI result. This saw the USD
initially trade higher before markets focused on stagflation concerns, and sold
the USD a little (with gold also firmer). Later the weekly oil inventory data
was stronger than expected which saw oil retrace sharply, boosting the USD. And
then during his Q&A session Fed Chairman Bernanke commented on FX intervention
â€“ again supporting the greenback. For the New
Zealand dollar this saw the
pair dip below 0.7700 but then recover in line with a Wall Street rally to be
little changed overall.
Australian dollar was also largely driven by USD direction, with a slight underperformance
bias due to yesterdayâ€™s more dovish than expected RBA Governor Stevens speech.
The AUD/USD consolidated around 0.9740 late NY, down 40 pips.
under 104 in the NY morning but rebounded back towards 105 amid improved USD
and equity sentiment.
up on the higher US CPI stagflation concern but then shed more than a cent at
1.5815 by late NY as oil traded $12 lower than Tueâ€™s highs and US equities extended
jumped a shocking 1.1% in June (its second highest monthly move since the
early 1980s), pushing the annual rate up to 5% yr, its fastest since the early 1990s.
In June, energy surged 6.6% (including gasoline up 10.1%) which the BLS has said
previously is in part due to the seasonal factors weighing against the energy component
in April-May but then paying back in June. Food prices rose a steep 0.7%. The
core rate rose by a sold 0.3%, reflecting renewed strength in the shelter component
(up 0.3%) after a string of more benign outcomes; a 0.1% rise in apparel (though
prices here are still slightly lower than a year ago); auto prices up 0.1%
after a series of declines; and an above trend gain in education of 0.5%.
Medical care costs continued subdued, up 0.2% last month.
industrial production rose 0.5% in June, thanks to a bounce in utility
(and also mining) output and stronger auto production following the end of a
strike. But manufacturing was subdued (even with the auto bounce), rising just
0.2% after a 1% fall earlier in Q2; ex autos, manufacturing was down 0.1%, its
third consecutive decline. These data still indicate mild recession in the
factory sector, with total manufacturing contracting 0.6% yr.
chair Bernanke testified again, in the House. He reiterated his main points from
Tuesday, but also said he doesnâ€™t place much weight on a technical recession call.
On fx intervention, he said it should be used â€śonly rarelyâ€ť.
minutes to the June 25/6 FOMC meeting were actually more consistent with Bernankeâ€™s
testimony this week than with the June statement. Members noted that downside
risks to growth were still â€śsignificantâ€ť, and felt that the recent firming in household
spending wouldnâ€™t be sustained. Even so, some members favoured a rate rise â€śvery
soonâ€ť to combat inflation.
news, the TIC data showed that capital flows were less supportive of the
US$ in May
than in April; the NAHB homebuilder sentiment index fell to a new record low of
16 in July.
May tertiary activity index softer than anticipated. The index
fell 0.2% in May, following an upwardly revised 1.9% rise in April.
Euroland CPI was unrevised at 4% yr in June, but the core rate edged up a tick
to 1.8% yr.
jobs market continues to soften. Unemployment rose 16k, its fastest monthly
pace in June since the early 1990s, sufficient to lift the benefit claimant jobless
rate from its record low, up a tick to 2.6%.
to like NZD/USD lower multi week especially on a TWI basis. However, this weekâ€™s
stronger than expected CPI release should hold off further rate cut expectations
for now, hence the NZD is likely to range trade ahead of next weekâ€™s RBNZ
Country Release Last Forecast
17 Jul Aus
Jun Merchandise Imports AUDbn 18.2 â€“
Housing Starts â€“3.3% â€“2.0%
Permits â€“0.4% flat
Jobless Claims w/e 12/7 346k 380k
Philadelphia Fed Index â€“17.1 â€“19.0
Monetary Policy Report
18 Jul Aus
Q2 Export Price Index 3.5% 10.0%
Price Index 2.7% 2.7%
Jpn Jun Bank
of Japan Minutes
Trade Balance â‚¬bn sa 2.2 0.8
Producer Prices %yr 6.0% 6.5%
â€˘ NZ Q2 CPI
Review (15 July)
Economic Overview July 2008 (14 July)
â€˘ NZ Weekly
Forex Outlook (14 July)
â€˘ NZ Q2 CPI
Preview (10 July)
Interest Rate Focus (9 July)
papers/publications are available on Online Research on Westpac
Bankâ€™s website (www.wib.westpac.co.nz)
Westpac Banking Corporation ABN 33 007
457 141 incorporated in Australia (NZ division). Information current as at 14
November 2007. All
customers please note that this information
has been prepared without taking account of your objectives, financial situation
or needs. Because of this you should, before acting on this information, consider its appropriateness,
having regard to your objectives, financial situation or needs. Australian
customers can obtain Westpac's financial services guide by calling +612 9284
8372, visiting www.westpac.com.au or visiting any Westpac Branch. The information may contain material provided
directly by third parties, and while such material is published with
permission, Westpac accepts no responsibility for the accuracy or completeness
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notice to exclude liability for the information. The information is subject to change without
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may become apparent at a later date. Westpac Banking Corporation is regulated
for the conduct of investment business in the United Kingdom by the Financial Services Authority. Â©
2004 Westpac Banking Corporation. Past performance is not a reliable indicator
of future performance. The forecasts given in this document are predictive in
character. Whilst every effort has been taken to ensure that the assumptions on
which the forecasts are based are reasonable, the forecasts may be affected by
incorrect assumptions or by known or unknown risks and uncertainties. The
ultimate outcomes may differ substantially from these forecasts.
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