Wednesday June 22, 2005 - 22:04:57 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar: NZD steady ahead of key data releases
With key domestic data releases due towards the end of the week, the NZD trod water during the local session on Wednesday. There was little market reaction to the release of consumer confidence data, which slipped to its lowest level in two years and the currency traded a narrow range on the day bordered by 0.7150 and 0.7179. USD strength dominated early in the offshore session with the US currency strengthening against the euro and yen amid continued speculation of an imminent reduction in European rates and a dampening of recent Yuan revaluation theories. Despite dipping to overnight lows of 0.7135, however, NZD/USD recovered into 0.7170, from where the market opens this morning.
Australian Dollar: AUD resilient despite USD gains
The AUD also stuck to familiar ranges on Wednesday. Although the Westpac-MI April leading index release showed a meager increase of 1.3% on an annualised basis, this didn't prove a currency driver and the market ended a lacklustre day at 0.7780. AUD/USD dipped initially during overnight trading as the USD appreciated across the board. With the AUD remaining especially resilient on the crosses,AUD/USD improved from overnight session lows of 0.7749 and opens this morning at 0.7785.
Major Currencies: Greenback boosted by European interest rate talk
The broad USD strengthened on Wednesday initially fuelled by gains against the euro and GBP as speculation mounted that European interest rates may eventually soften. Euro and GBP both fell dramatically as the BoE released minutes from its last policy meeting indicating that there was some sentiment for a rate cut. Speculation of rate cuts in Europe to kick-start the regions sluggish economy has also grown, weighing on the euro. Elsewhere, Japan's unadjusted May trade balance was released at JPY296bn and while it was much less than forecast it did not see the yen continue to sell off. The offshore session saw the yen give up all its earlier gains against the dollar and eventually posted an intraday low of 109.10. Oil went to fresh highs touching 58.90 on lower oil inventory data.
Japan's trade surplus narrowed to ₯690bn in May. This was close to our forecast, but a long way from the market expectations of a ₯100bn widening. The price of both exports and imports fell solidly in the month, implying valuations were an important driver of the outcome.
Bank of England votes 7-2, but the 2 went for cuts. The market had been looking for a 9-0 on hold vote, but the Bank surprised us by voting 7-2, with the 2 going for cuts. The two cutters were the Bank's chief economist, Charlie Bean, and outgoing committee member Marian Bell.
Canada's leading index up 0.3%. The result was as expected, but given the global propensity for leading indices to be dragged lower by low bond yields, this is a relatively good result.
Country Release Last Forecast
23 Jun NZ Q1 Current Acct Qtr NZDmn -3,108 -1,121
US May Existing Home Sales 4.5% 1.0%
Initial Jobless Claims w/e 19/6 333k 326k
Jpn Apr Tertiary Activity Index -1.0% 0.8%
Q2 MoF/CO BSI Manuf. -7.6% flat
24 Jun NZ Q1 GDP 0.4% 0.9%
US May New Home Sales 0.2% 3.0%
May Durable Goods Orders 1.9% 1.5%
Jpn May Corp Services Prices %yr -0.4% -0.4%
Latest Research papers/Publication
NZ Q2 Consumer Confidence (22 June)
NZ Weekly Forex Outlook (20 June)
NZ Weekly Interest Rate Wrap-up (20 June)
NZ Q1 GDP Preview (17 June)
NZ Q1 Current Account Preview (17 June)
M&A Update - More support for the NZD (17 June)
NZ Weekly Forex Outlook (13 June)
NZ Q1 Terms of Trade Review (10 June)
RBNZ June MPS Review (9 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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