Thursday July 7, 2005 - 21:43:11 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar: NZD breaks through 0.6700
NZD/USD opened around 0.6720 yesterday morning and continued to soften throughout the day - a pattern that has been seen all week. Sellers of the currency continued to dominate flows as the markets bearish perception of the kiwi remains unchanged. NZD/USD rallied to a high of 0.6748 in the local session on the back of strong Australian jobs data. This was short lived however and it sold off back towards 0.6700 where this level was tested and broken in late afternoon trading. The offshore session provided a boost to the NZD where it rallied to an intraday high of 0.6807 as news filtered through of explosions in the London underground. Eventual selling of the currency at these levels pushed the kiwi lower to 0.6720 and it opens around this level this morning.
Australian Dollar: Employment surges in June
The AUD looked shaky at yesterday's open as it hovered around 0.7400. It was not long before it slipped through the figure to find next support at 0.7380. A rise in Australian employment for August saw the AUD surge back through 0.7400 to post a high of 0.7422. Total employment soared nearly 42,000 for June which was well above forecasts. Unemployment fell to a new 28 year low of 5.0%. Profit taking dragged the currency back through the figure and down to an intraday low of 0.7365. The London bombings gave the AUD a much needed reprieve where it rallied nearly 70 points in tandem with the NZD and EUR. The AUD opens lower this morning around 0.7400.
Major Currencies: London Bombings Dominate Overnight Trade
The USD continued to press higher during the local session, yesterday with the currency again seen testing 1.1900 against the euro and yen
making new highs for the year at 112.33. Overnight, however, the market was obviously dominated by the news of multiple explosions on London's transport network, quickly attributed as a coordinated terrorist attack to coincide with this weekend's G8 meeting, over which the UK is presiding. Sterling and the USD immediately lost ground as the market scrambled for safe-haven currencies, most notably Swiss Francs.
While the pound quickly slumped to lows of 1.7374, the euro and yen posted gains to 1.2045 & 111.48 before paring gains as European Bourses recovered after suffering immediate losses approaching 3%. With the London bombings dominating the newswires, the market paid scant attention to decisions by the Bank of England and the European Central Bank to leave interest rates on hold at 4.75% & 2% respectively. Yen opens this morning at 112.05; while the euro is seem at 1.1945 and sterling at 1.7435
The Bank of England left rates on hold
at 4.75% following this week's policy meeting. Our view has been that the Bank would not adjust rates lower this year, despite increasing calls for it to do so, and market pricing factoring in cuts. However the arguments for and against policy easing are extensive and finally balanced. While today's terror attacks on London provide an additional reason to cut rates (as the Bank did in the week after September 11), the Bank chose to leave rates on hold at today's policy meeting which concluded just a few hours after the attacks.
The European Central Bank left rates on hold
at 2.0% following today's Council meeting. ECB chief Trichet said at the press conference "we looked at all possible factors, and we concluded interest rates were appropriate. We are not pre-announcing a rate cut, and we are not pre-announcing a rate hike. We are in a wait-and-see attitude". Re the London bombings, he said that "we do not trust at this stage that these events could have any significant impact... our duty is to stick to our mandate, be alert and calm".
US initial jobless claims rose 7k to 319k.
Claims remain low, consistent with strong labour market. There is upside risk in weeks ahead from temporary summer layoffs for retooling in the auto sector. The seasonal adjustment process can't usually cope, but the surge in claims usually only lasts several weeks.
Country Release Last Forecast
US Jun Non-Farm Payrolls 78k 180k
Jun Unemployment 5.1% 5.1%
May Wholesale Inventories 0.8% 0.5%
May Consumer Credit USDbn 1.3 4.0
Fedspeak: Hoenig - -
G7 May Leading Index 6m ann'lsd -1.6% -
Ger May Industrial Production 1.3% -0.5%
Can Jun Employment 35k 22k
Latest Research papers/Publication
NZ Q2 Employment Confidence Index (6 July)
NZ Economic Overview July 2005 (4 July)
NZ Weekly Forex Outlook (4 July)
NZ Weekly Interest Rate Wrap-up (4 July)
A capital idea (1 July)
NZ Weekly Interest Rate Wrap-up (28 June)
NZ Weekly Forex Outlook (27 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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