Wednesday May 25, 2005 - 23:06:18 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning Report
Westpac Institutional Bank Morning Report
New Zealand Dollar: Short covering keeps NZD above 0.7100
From yesterday's opening levels at 0.7140, NZD/USD failed to progress above 0.7150 and faced immediate selling, which erased much of the currency's overnight gains. Buyers emerged above 0.7100, however, and the NZD rebounded above 0.7130 towards the close of the local session. The offshore session initially saw a strengthening of the USD and once again lows of 0.7108 were tested. Despite, stronger than expected US durable goods and new home sales data, technical support levels across the board, remained intact forcing traders to cover short positions. With this, the NZD again improved to 0.7135, from where we start this morning.
Australian Dollar: AUD remains above 0.7600 despite domestic data
After strengthening above 0.7600 following the release of May 3's FOMC minutes, the AUD also ran into sellers into 0.7640. The market shrugged off local data releases that confirm a cooling of the Australian economy. A 1.1% fall in building work done and a WBC-MI reading of -0.2% had little impact on the currency which recovered from intraday lows of 0.7586 to reclaim 0.7600 into the local close. Although the offshore session was marked by morning strength in the USD, failure to move to lower ranges against the euro, saw a round of shortcovering, which offered support to the market.
Major Currencies: Yuan speculation provides direction
The dollar weakened against European currencies last night but strengthened against the JPY after more comments out of China about yuan revaluation. Sterling
shrugged off weak GDP data to reach an overnight high of 1.8336, and with a lack of data out in the Euro zone the euro
followed suit, reaching 1.2620 before settling just above 1.2600. Chinese officials again stipulated that they were in no hurry to revalue the yuan causing the JPY to be sold. It is widely believed that yuan currency revaluation would cause JPY to strengthen.
Bank of Japan minutes: more transparency on the way?
The minutes revealed an important discussion on transparency was conducted. Some members forwarded the idea of offering economic projections a further year out. Others agreed in principle, but thought now was not the time, whilst deflation remained intact.
Japan's April trade balance narrowed to ₯712bn.
A 6% surge in prices drove a 5.6% burst in April import values.
US durable goods orders jump 1.9% in April,
led by a 3.4% jump in auto orders after three consecutive declines, and a 28% surge in civilian aircraft orders, reversing the prior month's decline transport orders were down marginally, mainly due to a 14.5% drop in defence, reversing the prior two months' gains. Encouragingly, after two consecutive declines, core capital goods orders recovered somewhat in April. Together with upward revisions to March, the orders profile is now more or less flat in March-April and more consistent with the business survey evidence on orders.
US new home sales rise 0.2% in April,
but were revised dramatically, smoothing the recent profile of the data and lowering the previous estimate for March by 8.2%. However April posted a further modest gain, setting a new sales record. Despite the revisions, this is further evidence of a booming housing market in the US, fuelled by low long term interest rates and growing popular belief that house prices will keep going up.
Central Banks on hold.
The Bank of Canada left its overnight rate unchanged at 2.50%, and noted no material change in the economic outlook. Also, the Norwegian central bank left its key rate at 1.75%.
German IFO business climate falls from 93.3 to 92.9 in May,
the fourth consecutive month in May, to a 21 month low. All industries apart from retail recorded declines. This is further evidence that German business is worried about where the economy is heading.
UK GDP growth was revised down from 0.6% to 0.5% in Q1.
Government spending grew 0.7%, but household spending was subdued at 0.3% and business investment flat.
Country Release Last Forecast
NZ Apr Trade Balance NZDmn -194 -338
Aust Q1 New Capital Expenditure 5.7% flat
04/05 Capital Expenditure Plans 8% n/f
05/06 Capital Expenditure Plans 1.5% n/f
US Q1 GDP Revision %ann 3.1%a 3.6%
Initial Jobless Claims 321k 325k
Fedspeak: Guynn and Moskow
UK May CBI Industrial Trends Survey 5 n/f
Latest Research papers/Publication
LaLatesttest research Papers/Publications
NZD: Finding supply and demand (25 May)
Diversification - no place like home (24 May)
Wages - a precursor of inflation? (23 May)
NZ Weekly Forex Outlook (23 May)
NZ Weekly Interest Rate Wrap-up (23 May)
NZ Budget 2005 Review (19 May)
Taking Stock (17 May)
These papers/publications are available on Online Research on
Westpac Institutional Banks website (www.wib.westpac.co.nz)
Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 24 May 2005. 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. © 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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