Thursday June 2, 2005 - 22:30:37 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 NZD consolidates after breaking lower
NZD/USD made a gradual recovery on Thursday following the previous days swift sell-off. The NZD opened near the low at 0.6954 and slowly moved up to 0.6990 during NZ time. With no data releases, direction was characterised by small profit taking as the NZD managed to pick itself up off the canvas and grind higher throughout the day. Sentiment is still firmly in favour of the US dollar as soft data continues to come out of Australasia, and while the chance of a RBNZ interest rate hike next week diminishes. The offshore session saw a brief sortie above 0.7000 to the high at 0.7016 but the NZD closed slightly lower just holding on to the 0.7000 handle.
Australian Dollar: AUD rallies off 6-month lows
AUD/USD rallied strongly yesterday, rebounding well from the punishment it took on Wednesday. The reversal was due in part to a broad corrective move in the US dollar where recent strength took a micro pause. In a week of poor economic data, the only bright spot was news that the economy produced a smaller than expected trade deficit of $1.3bn. April dwelling consents also made a recovery rising 1.8% from Mar. The AUD rallied off the 6-month low at 0.7475 and climbed throughout the day to a high of 0.7558 during late offshore trading.
USD profit taking takes euro off 8-month lows
The USD lost ground against major currencies on Thursday as traders took profit on recent long USD positions ahead of tonight's US payrolls report. Expectations are for 185k non-farm jobs created in May down from 274k in April. The euro
rallied off an 8-month low of 1.2158 during yesterday's local session and was taken higher offshore on USD profit taking, testing 1.2300. The decision by the ECB on Thursday to leave interest rates unchanged at 2% had little impact as the decision was widely expected. USD/JPY
fell off its recent highs testing a break of 108.00 and opens this morning at around 108.20.
US Q1 productivity growth was revised up from 2.6% to 2.9%,
more or less in line with the upward revision to GDP. However a sharp upward revision to compensation per hour more than offset the higher productivity, with the result that unit labour costs were revised up sharply from 4.8% to 6.3%.
US factory orders rose 0.9% in April,
constrained by a small fall in the non-durables component, though this followed a 3% bounce in March, with most of these swings related to the shifting price of energy. Outside of durable transport orders, the picture is lacklustre, though maybe not quite as dire as some of the business surveys seem to be suggesting. Note that factory inventories rose only 0.1%, a sign that inventories will be a drag on Q2 GDP growth.
US initial jobless jumped by 25k to 350k last week, although the Bureau of Labor Statistics said that much of the rise was due to temporary layoffs in the auto industry. That seems odd, because the annual plant shutdowns for new model retooling normally occur in July. But if we take the BLS explanation at face value, labour market conditions have not deteriorated. That said, continuing claims posted their first rise in three weeks, though it was not especially large.
The European Central Bank left its repo rate unchanged at 2.0% after today's Council meeting. Although in the press statement ECB chief Trichet noted that "most recent indicators for economic activity remain, on balance, on the downside", in the Q&A he refused to be drawn upon whether or not a rate cut (or rise for that matter) was discussed. The message was that the Bank remains firmly on hold.
UK house prices. Country Release Last Forecast
NZ May ANZ Commodity Prices NZD 1.3% n/f
Apr Trade Balance (F) NZDmn -147 -147
Aust Q1 House Prices (ABS) 0.6% flat
May AIG PSI 51.4 n/f
US May Non-Farm Payrolls Change 274k 170k
May Unemployment Rate 5.2% 5.3%
May ISM Non Manufacturing 61.7 58.5
Eur Apr Retail Trade 0.3% 0.5%
May PMI Services 52.8 52.5
UK PMI Services 56.5 56.0
Latest Research papers/Publication L
Taxation - who pays and how much? (2 June)
Warning shot for the RBNZ (31 May)
NZ Weekly Forex Outlook (30 May)
NZ Weekly Interest Rate Wrap-up (30 May)
What are markets telling us? (27 May)
NZD: A change in the rules? (27 May)
NZD: Finding supply and demand (25 May)
Diversification - no place like home (24 May)
Wages - a precursor of inflation? (23 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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