dollar was range-bound until the much stronger than expected Aug Chicago PMI kicked
off a 0.5% rally on USD Index that was supported by a late oil sell-off and
decent consumer sentiment. Equities were not supportive however, with the DJIA
opening lower, showing no real inclination to recover and closing on the lows,
-172pts/-1.5%. Some pointed to the threat of economic damage from Hurricane
Gustav undermining stocks but of course this doesnâ€™t fit the crude oil from
$118.50/bbl to a $115.46/bbl close.
Zealand dollar wandered
around 0.7050 then sank below 0.7000 before steadying.
lower from the 0.8640 area to a low of 0.8555, closing at 0.8578. Commodities
offered mixed direction, mostly to the downside.
more than a cent to its NY lows of 1.4640, grinding back to a 1.4673 close.
equities left USD/JPY largely excluded from the broad dollar
gains, with the pair chopping around in a 108.43-97 range after the London morning
core PCE deflator rose 0.3% in July, which saw the annual rate edge higher again to
2.4%. The headline rate rose to a 17-year high of 4.5%. While gasoline prices
started to reverse course in late July, similar falls over the Aug-Sep period
in recent years mean that the seasonal adjustment factor will keep annual
inflation rates elevated for a while longer. Personal income fell 0.7% in July
as the tax rebates started to drop out of figures, while personal spending rose
US University of
sentiment index was revised up to 63.0 in its final August report.
One-year ahead inflation expectations were unrevised at 4.8% from 5.1% in June and
July. The cost shock from oil prices seems to account for the slump and more
recent recovery in consumer confidence, with spending in dollar terms holding
up through this period, but failing to keep pace with rising prices.
Chicago PMI surged to 57.9 in August, ahead of the median forecast of 50.0. Orders
and shipments both jumped sharply, but the employment measure fell further from
45.9 to 39.2. Prices paid dropped to 80.6 from 90.7, although this remains at extremely
high levels. The index is now well clear of the 44.5 low recorded in February.
consumer prices accelerated to 2.3%yr in July. The national
headline rate rose by 0.3ppt to 2.3% in July. Ex fresh food the rate was 2.4%
(from 1.9%) and ex fresh food and energy 0.2%yr (from 0.1%). The Tokyo headline
fell by 0.3ppt to 1.3% in August. Ex fresh food the rate was 1.5% (from 1.6%)
and ex fresh food and energy 0.2%yr (from 0.3%).
industrial production rose 0.9% in July, better than expected. That compares
to the consensus forecast of -0.5%, and our expectation of a flat outcome.
HICP inflation decelerated to 3.8% yr in Aug from 4.0% yr in July. There was
no breakdown with the numbers, but national data indicates that lower world oil
prices brought down heating and petrol prices in August.
July unemployment remained steady at 7.3%, as expected. Unemployment has
been rising in countries affected by slowing housing markets, such as France and Spain, but in Germany the labour
market remains robust.
economic sentiment dropped to 88.8 in Aug from 89.5 in July. Industrial sentiment
fell to -10 from -8, while consumer confidence picked up slightly, likely reflecting
lower petrol prices that month.
GDP rose 0.3% annualised in Q2, defying rumours of a negative print, though
Q1 was revised down from -0.3% to -0.8%. The price deflator surged 10.5% after the
4.9% rise in Q1.
improvement in NZ business confidence in August adds to the expectation that
short NZD positions will keep being trimmed, though investors are unlikely to
take large new positions as local markets count down to the expected RBNZ rate
cut on 11 Sep.
Release Last Forecast
TD-MI Inflation Gauge 0.4% â€“
Account Balance, AUDbn â€“19.5 â€“10.8
Exports Contrib to GDP, ppts â€“0.7 0.3
Profits 2.2% 6.0%
Inventories 0.9% 0.3%
Jpn Jul Cash
Earnings %yr 0.4% 0.3%
Eur Aug PMI
Factory (F) 47.5a 47.5
UK Aug House
Prices %yr â€“8.8% â€“10.7%
Consumer Credit Â£bn 0.9 1.0
Mortgage Lending Â£bn 3.1 2.8
Factory 44.3 44.0
â€¢ NZ Weekly
Forex Outlook (25 August)
â€¢ NZ Weekly
Forex Outlook (18 August)
â€¢ NZ Q2
Retail Sales Review (15 August)
â€¢ NZ Weekly
Forex Outlook (11 August)
papers/publications are available on Online Research on Westpac
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