Monday August 11, 2008 - 22:17:31 GMT
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Westpac Institutional Bank - www.westpac.co.nz
FX Blog - Morning Report
Morning Report Tuesday 12 August 2008
News and views
After a brief setback on hawkish ECB comments in London, USD quickly resumed its upwards march. Again, this came despite an empty US data calendar as USD enjoys â€śleast worstâ€ť status. Commodities came under heavy pressure once more, with gold price action catching the eye: spot gold drifted down $5 to $855/oz in NY then suddenly collapsed to around $820/ oz, a 20% fall from the March highs and its weakest point since Dec07. The S&P GSCI commodity index officially dropped into bear territory, with oil prices also weighing. The New Zealand dollar benefited from USDâ€™s dip in London, jumping 75 pips to a high of 0.7086 but then shed a full cent by late NY, bumping around 0.6980, fresh lows since Sep07.
The Australian dollar squeezed up 90 pips to a 0.8952 high in the London morning but then resumed its increasingly familiar sell-off, to 0.8815 by late NY.
EUR/USD rallied on headlines from ECBâ€™s Liebscher. He described inflation as â€śworryingâ€ť and said slower growth was only a â€ślimited surpriseâ€ť. This helped the pair to 1.5084 but it spent the rest of the overnight session under pressure, to near 1.4900.
USD/JPY bounced from a 109.55 low to touch 110.40 as US equities swung from negative to positive but again failed to make headway from there, easing to 110.15.
No US data to report.
German wholesale prices up 9.9% yr in July, the highest this decade, although recent developments in commodity markets should soon see the pace of acceleration moderate somewhat.
UK producer prices may be peaking. July data showed the first monthly decline (â€“0.6%) in input prices since August last year. Annual growth in core output prices was steady at 6.7% yr, after jumping sharply from 3.2% yr in February. With oil and some food prices falling in recent weeks, the August PPI report might more clearly show some softening in price pressures. But that wonâ€™t help the July CPI, expected (by us) to jump from 3.8% yr to 4.3% yr (out tonight). Other UK data included a near ÂŁ300mn widening in the visible trade deficit to ÂŁ7.7bn in June.
Canadian housing cooling. Housing starts fell 14% in July to their lowest level for the year so far, although bad weather in Ontario probably dampened the picture somewhat. In June, new house prices rose 0.1% to be up just 3.5% over the year â€“ the slowest annual growth rate since 2002.
Given New Zealandâ€™s better than expected Q2 employment data last week, we cut half our short NZD TWI position and suspect the greater gains short term could be through short NZD/USD.
Westpac Strategy, 0800 922 239
With contributions from Westpac Economics
Country Release Last Forecast
Aus Jul NAB Business Survey 0 â€“
US Jun Trade Balance $bn â€“$59.8 â€“$61.0
Aug IBD/TIPP Economic Optimism 37.4 37.0
Jul Federal Budget $bn â€“69.0 â€“
Jpn Jul Corp. Goods Prices %yr 5.6% 5.7%
UK Jul BRC Retail Sales Monitor %yr â€“0.4% â€“
Jul RICS House Price Net Balance â€“88.0% â€“90.0%
Jul CPI %yr 3.8% 4.3%
Jun DCLG House Prices %yr 3.7% 1.5%
Can Jun Trade Balance C$bn 5.5 5.9
Latest Research Papers/Publications
â€˘ NZ Weekly Forex Outlook (11 August)
â€˘ NZ Q2 HLFS Review (7 August)
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)
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 12 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
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