Thursday June 9, 2005 - 21:05:34 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: RBNZ leaves rates on hold
After softening on the back of euro selling early yesterday morning the NZD continued to soften ahead of the MPS announcement at 9am. A spike higher above 0.7140 occurred briefly beforehand but soon resumed its downward move. The RBNZ left rates unchanged as expected at 6.75%, however they maintained a hawkish bias and have not ruled out further hikes should future data imply inflationary pressures are increasing. Market reaction to the MPS was subdued with the currency finding a floor at 0.7000 shortly after the announcement. The NZD pushed slowly higher during the remainder of the local session touching a high of 0.7165 in early afternoon. Overnight trading was relatively uneventful and NZD/USD pushed lower throughout the session. It opens around 0.7110 this morning.
Australian Dollar: AUD outperforms on employment data
AUD/USD opened on its lows yesterday morning finding strong support at 0.7640. The AUD ranged sideways for much of the morning before surging higher on the back of stronger than expected employment data released in early afternoon trading. Total employment rose 14k in May which was well above market consensus of -5k. Unemployment remained steady at 5.1% a generational low. After trading to an intraday high of 0.7689 the AUD softened to be supported at around 0.7660. A quiet offshore session saw the currency trade a tight 30 point range and it opens around 0.7670 this morning.
Major Currencies: Dollar up on Greenspan speech
The dollar was up against major currencies again overnight, helped by comments from Fed Chairman Alan Greenspan. On the back of his comments the euro
fell to its session low of 1.2178, only 20 points above the 8 month low seen last week, but managed to regain 1.2200 in the following hours. Sterling
followed the euro for much of the day as the BoE's widely anticipated decision to hold interest rates at current levels was largely ignored by the market. After bouncing off a 1.8175, Sterling opens this morning around 1.8200.
US initial jobless claims fall 21k to 330k.
Initial claims corrected for the prior week's auto sector layoff related spike, although the public holiday on the Monday last week could be a potential distortion. Continuing claims fell slightly. Overall, data are consistent with a still healthy labour market.
Fed chairman Greenspan's testimony to the Joint Economic Committee
was brief and reasonably to the point. He sounded confident regard the economy, devoted considerable attention to the upbeat housing market, and gave no hint that the Fed might be considering diverting from the measured approach to monetary policy tightening. On the economic soft patch: "Over the past year, the pace of economic activity in the US has alternately paused and quickened. The most recent data support the view that the soft readings on the economy observed in the early spring were not presaging a more serious slowdown in the pace of activity." On housing: "Although a "bubble" in home prices for the nation as a whole does not appear likely, there do appear to be, at a minimum, signs of froth in some local markets where home prices seem to have risen to unsustainable levels." On inflation: " evidence of increased pricing power can be gleaned from the profit margins of non-financial businesses, which have continued to press higher even outside the energy sector". In the Q&A he discussed the bond yield conundrum, the neutral Fed funds rate and many other issues but did not seem to break any new ground.
The BoE left its repo rate unchanged at 4.75%
after this week's policy meeting. No statement issued, as usual. On the data front, stronger than expected data on exports, imports and industrial production (which showed a broad-based gain), belying the recent dire readings from many private business surveys. Continued relative strength in these official indicators would certainly prove sufficient to undermine recent mounting calls for a near-term rate cut from the BoE..
Country Release Last Forecast
NZ Q1 Terms of Trade 0.7% 0.9%
US Apr Trade Balance USDbn -55.0 -58.5
May Import Prices 0.8% -1.0%
Jpn May Corporate Goods Prices %yr 1.8% 1.8%
Eur Q1 Current Account Surplus EURbn 14.3 5.0
G7 Apr OECD Leading Index 101.4 n/f
Can May Employment Change 29k 15k
Apr Trade Surplus CADbn 4.2 4.2
Latest Research papers/Publication
RBNZ June MPS Review (9 June)
Taking stock - the sequel (8 June)
RBNZ Hot Points (7 June)
NZ Weekly Forex Outlook (7 June)
NZ Agribiz June 2005 (7 June)
RBNZ June MPS Preview (3 June)
NZD: Testing investor enthusiasm (3 June)
Taxation - who pays and how much? (2 June)
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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