Monday August 4, 2008 - 20:52:42 GMT
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Westpac Institutional Bank - www.westpac.co.nz
FX Research - Morning Report
Morning Report Tuesday 5 August 2008
News and views
The overnight session was mostly cautious as little fresh capital was committed ahead of the FOMC meeting. The main excitement was when a dollar sell-off was reversed by a sharp >$4/bbl plunge in NYMEX oil prices, with rumours swirling of commodity hedge funds in trouble. The New Zealand dollar was generally a little firmer through the session, trading to a high of 0.7335 before easing to just above 0.7300.
The Australian dollarâ€™s underperformance continued, probing above 0.9340 only to be firmly rebuffed as oil and other commodities fell (e.g. spot gold -$10/oz in short order), sending it below 0.9300.
USD/JPY generally pushed higher, trading to the 108.20 area in late NY.
EUR/USD was little changed overall, with its foray above 1.5620 ended by the oil price slide which knocked it back to 1.5570/80.
US core PCE deflator up 0.3% in June. This result was in line with the core CPI in June, and consistent with the quarterly core PCE deflator published last week in the Q2 GDP report, so not really fresh news. The annual rate
edged up from 2.2% yr to 2.3% yr. The report also showed a modest 0.1% rise in personal income, on top of the tax rebate boosted 1.8% surge in May; and a 0.6% rise in personal spending, stronger than June retail sales which only rose 0.1%.
US factory goods orders jump 1.7% in June. Durables were unrevised at 0.8%, while higher energy prices boosted non-durable orders to a 2.5% gain, and factory inventories by 1.0%.
Euroland Sentix investor confidence falls from â€“9.3 to â€“15.3 in Aug. The survey evidence out of Europe keeps plunging, pointing to a sharp decline in economic activity in the second half of this year. But Euroland producer prices accelerated to 8.0% yr in June, a new cycle high, so the ECB will remain alert to upside inflation risk.
UK construction PMI drops further in July. A new all-time low of 36.7 for this measure of activity in the housing and commercial property sector.
We continue to like NZD lower multi week especially on a TWI basis. Rate cutting cycles from the US Federal Reserve, Bank of England and Bank of Canada over the past 12 months have shown that currencies typically continue to decline through the cycle, despite a market already expecting the future cuts to come.
Westpac Strategy, 0800 922 239
With contributions from Westpac Economics
Date Country Release Last Forecast
5 Aug NZ Jul ANZ Commodity Price Index 0.0% â€“
Aus RBA Policy Announcement 7.25% 7.25%
US Jul ISM Non-Manufacturing 48.2 47.5
FOMC Rate Decision 2.00% 2.00%
Eur Jul PMI Services (F) 48.3a 48.3
Jun Retail Sales 1.2% â€“1.5%
UK Jun Industrial Production â€“0.8% â€“0.3%
Jul PMI Services 47.1 46.5
6 Aug Aus Jun Housing Finance â€“7.9% â€“2.5%
Jpn Jun Leading Index 92.9% 91.1
Latest Research Papers/Publications
â€¢ NZ Q2 Wage Review (4 August)
â€¢ NZ Weekly Forex Outlook (4 August)
â€¢ The coming employment downturn (30 July)
â€¢ NZ Weekly Forex Outlook (28 July)
â€¢ RBNZ OCR Review (24 July)
â€¢ NZ Weekly Forex Outlook (14 July)
â€¢ RBNZ OCR Preview (18 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 5 August 2008. 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 Westpacâ€™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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