Friday July 22, 2005 - 00:51:35 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar: NZD reaches 10 day high
NZD/USD opened around 0.6750 yesterday and proceeded to climb throughout the morning as the greenback continued to soften following Greenspan's testimony. The NZD traded a relatively narrow range and found a high of 0.6813 on the day. June migration data saw short term arrivals jump 14% boosted mainly by the influx of Lions supporters. However the tale of the tape is in the longer term trend which continues to show a decline in migration flows. NZD/USD rallied to an intraday high of 0.6879 on the China announcement however reports of more bombings in London stopped the currency in its tracks. The currency opens a touch softer this morning at around 0.6850.
Australian Dollar: AUD gets 100 points in one day
The AUD/USD drifted around 0.7550 yesterday morning before finding a bid tone during mid morning. This helped the AUD test resistance at 0.7600. The currency also gained on the crosses posting multi-year highs against the GBP and JPY. The AUD continued to consolidate its position just below 0.7600 for the remainder of the local session. Overnight saw the AUD benefit further as China revalued the Yuan but lost some momentum on news of further terror attacks in London. The AUD found a floor at 0.7620 and opens slightly higher this morning around 0.7650.
Major Currencies: Revaluation causes rumbles
China has loosened its currency peg against the USD overnight from 8.28 down to 8.11, a revaluation of 2.1%. The US has been calling for China to loosen its peg for some time. All major currencies strengthened on the news, USD immediately falling around 2.4% against JPY
to 110.16, being one of the biggest movers. Sterling
were bought up to highs of 1.2260 and 1.7615 before news came through of four more explosions on the London underground. This saw both currencies sold to lows of 1.2104 and 1.7430 respectively, but managed to recover most of the lost ground as information emerged that the bomb explosions were not as severe as the July 7 attacks.
People's Bank of China revalues renminbi:
a 2% revaluation from 8.27 to 8.11 vs the US dollar, plus a move to a currency basket regime. The announcement was welcomed by US officials, who also urged further adjustment. The Malaysians also dropped their peg, moving to a managed float against an undisclosed basket.
Terror attacks in London again. :
The apparent copycat attempt, just 2 weeks after the July 7 attacks, involved bombs on three tube trains and a bus, all of which failed to go off.
US Philadelphia Fed index jumps from -2.2 to 9.6 in July. :
The Philly Fed survey bounced in July, though not by as much as we expected; also the detail on orders and jobs was less impressive, the latter actually slipping. Still, the overwhelming message from all the recent business surveys is that the industrial sector appears to have "found the floor" mid-year, after a gradual slowing since late 2004.
US leading index surged 0.9% in June, :
way above expectations. And revisions substantially lifted the index's profile, with seven of the past year's nine declines revised to non-negative. Also initial jobless claims fell 34k to 303k, correcting for the prior two weeks' gains, which reflected temporary layoffs in the auto sector.
FOMC minutes. :
The June 29/30 FOMC minutes reveal that the Fed was reassured by recent data of the economy's strength in the face of higher energy prices. On asset prices (read housing), the Fed concluded that uncertainties meant responding more directly was seen as not contributing to the Fed's objectives over time. The meeting concluded the measured reduction in stimulus remained appropriate, with the Fed needing to be particularly alert to inflation developments which Greenspan's recent testimony reinforced.
UK retail sales volumes
picked up 1.3% in June, by much more than our above consensus 0.5% forecast in June. The gain was broadbased, including discretionary spending categories like apparel and household goods.
Country Release Last Forecast
Aust Q2 Export/Import Price Index -0.5%/-2.4% 10.0%/1.0%
Jpn May Tertiary Activity Index 1.8% -1.0%
Eur May Industrial New Orders 1.5% 1.0%
Ger Jul Cost of Living Prelim %yr 1.8% n/f
UK Q2 GDP %qtr 0.4% 0.4%
Can Jun Consumer Price Index %Yr 1.6% 2.1%
Jun CPI Core Ex8 %yr 1.6% 1.7%
Jun Retail Sales 1.5% -0.3%
Latest Research papers/Publication
Migration and the RBNZ (21 July)
NZ Weekly Forex Outlook (18 July)
NZ Weekly Interest Rate Wrap-up (18 July)
NZ Q2 CPI Review (14 July)
NZD: What really drives the currency? (14 July)
NZ Q2 CPI Preview (11 July)
NZ Weekly Forex Outlook (11 July)
NZ Weekly Interest Rate Wrap-up (11 July)
These papers/publications are available on Online Research on
Westpac Institutional Banks website (www.wib.westpac.co.nz)
(Previous days closing rates)
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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