Wednesday July 23, 2008 - 20:49:25 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report Morning Report
Thursday 24 July 2008
News and views
The offshore session saw the USD continue to regain ground, though more modest in scale. The story was more of the same from Tuesday night, with commodities continuing their recent softness and equities up again, albeit not by much. Oil prices probed above $128 but were firmly rebuffed, slipping to the low $124s in late NY trade, fresh lows since 5 June. The New
Zealand dollar was soft throughout, spending most of the session just above 0.7500, in countdown mode ahead of the RBNZ decision.
The Australian dollar came under steady selling pressure, retreating from the 0.9680 area to 0.9610/15 by late NY, with stop losses triggered around 0.9660.
USD/JPY was bid on the stronger USD and better equity performance, with support also from reports of a Japanese insurer buying a US counterpart. The pair is closing in on 108.00.
EUR/USD was soft throughout, breaking below 1.5700 as oil retreated and US yields rose (2yr Treasury yield up 31bp over the past week, to 2.73%)
The Fedâ€™s Beige Book found that the US economy slowed in June and July, with â€śsluggishâ€ť consumer spending in most districts. Retail price pressures were seen as â€śelevated or increasingâ€ť across the board, but there was limited evidence of any pass-through to wage pressures.
Eurozone industrial new orders for May were soft, the monthly number down 3.5% versus an expected 1.3% fall. The high EUR continues to hamper Europeâ€™s manufacturing sector.
Bank of England minutes reveal 3 way split with 7 votes for no changes, 1 for a cut (Blanchflower) and a surprise 1 for a hike (Besley). While the vote for a hike was a surprise for us it reveals the underlying challenges facing the Bank of England â€“ the economy is slowing rapidly but they cannot provide the stimulus necessary because short term inflation is now well above target. For us this is the worst of all worlds for GBP medium term, despite the short term bounce the announcement provided.
Canadian June CPI roughly as expected with the core rate up 0.1%mth (1.5%yr) and the headline a slightly stronger than expected 0.7%mth (3.1%yr).Outlook
We continue to like NZD/USD lower multi week especially on a TWI basis. However, this morningâ€™s RBNZ announcement is key.
Westpac Strategy, 0800 922 239
With contributions from Westpac Economics
Date Country Release Last Forecast
24 Jul NZ RBNZ OCR Review 8.25% 8.25%
US Initial Jobless Claims w/e 19/7 366k 380k
Jun Existing Home Sales 2.0% â€“2.5%
Jpn Jun Trade Balance ÂĄbn 642 270
Eur May Current Account sa â‚¬bn â€“0.3 â€“
Jul PMI Factory Advance 49.2 48.5
Jul PMI Services Advance 49.1 49.0
Ger Jul Ifo Business Climate Index 101.3 100.5
UK Jun Retail Sales 3.5% â€“3.0%
25 Jul US Jun Durable Goods Orders flat â€“0.5%
Jun New Home Sales â€“2.5% â€“2.0%
Latest Research Papers/Publications
â€˘ NZ Weekly Forex Outlook (14 July)
â€˘ RBNZ OCR Preview (18 July)
â€˘ NZ Q2 CPI Review (15 July)
â€˘ NZ Economic Overview July 2008 (14 July)
â€˘ NZ Weekly Forex Outlook (14 July)
â€˘ NZ Q2 CPI Preview (10 July)
These papers/publications are available on Online Research on Westpac
Institutional 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 of any such material. Except where contrary to law, Westpac intends by this notice to exclude liability for the information. The information is subject to change without notice and Westpac is under no obligation to update the information or correct any inaccuracy which 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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