Thursday September 1, 2005 - 00:29:41 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar: End of winter sees NZD uninspired
The local session was characteristically flat yesterday, a scene that has become common place during the month of August. The NZD traded a 40 point range during most of our day contained between 0.6860 and 0.6900. NZ building consent data was released during the morning and fell 7% for the month of July the first decline in 3 months. Buying interest in NZD/USD was evident during the offshore session underpinning the currency. The NZD was further boosted after a report was released showing business conditions in the Midwest US fell sharply. NZD/USD posted an intraday high of 0.6955 on the back of this news and the currency opens around this level this morning.
Australian Dollar: AUD finds it feet on 7 week low
The AUD's decline was halted yesterday as it teetered on a 7 week low around 0.7460. Like its NZD cousin, the AUD was range bound during end of month trading. Again focus was firmly on local data releases, this time the Q2 current account balance, building approvals and credit growth had centre stage. The Q2 current account narrowed more than expected and posted a deficit of 12.64bn. In addition, as a proportion of GDP, the deficit fell to 5.7% down from 6.9%. Building approvals and credit growth also moderated for July adding credence to the fact that domestic interest rates will remain on hold for the remainder of 2005. Soft USD data overnight allowed the AUD gain ground and it clawed its way back up through 0.7500.
Major Currencies: Dollar falls as data sours
The USD fell across the board overnight as a poor economic release added to the current US economic worries. The Chicago PMI's fall is the latest in a short-term run of bearish signals coming out of the States, which include the high oil price and hurricane Katrina. The euro
were both up 1% for the day, reaching highs of 1.2358 and 1.8057 respectively, with most of the gains immediately following the data release. While JPY
strengthened 0.5%, the market was a little reluctant to by yen as the Japanese economy is also heavily exposed to the high oil price, given that it does not produce any locally. JPY opens this morning around 110.70, and the market now looks to data coming out of the US on Thursday, to see if the poor run will continue.
Japanese July industrial production down 1.1%.
This outcome is slightly weaker than we had anticipated. Production and shipments both contracted slightly more than 2%yr in the month.
US Q2 GDP growth revised down slightly to 3.3% ann'lsd.
The main negative revisions were to personal consumption and net exports, partially offset by less weak inventories. The core PCE deflator was revised down from 1.8% to 1.6%.
US Chicago PMI plunges from 63.5 to 49.2.
Extraordinary volatility in recent months, even by the standards of this particular release, provides further justification for our view that this is no longer a particularly reliable or useful US economic indicator.
Canadian GDP growth 3.2% ann'lsd in Q2.
Also, June growth was 0.2%. There is enough growth momentum here to justify the Bank of Canada resuming its monetary policy tightening next week.
Euroland GDP growth unrevised at 0.3% in Q2.
However Q1 growth was revised down from 0.5% to 0.4%. The breakdown showed weak investment growth but a slight fall in household spending.
Euroland CPI flash estimate 2.1% yr in Aug.
unemployment fell 12k in Aug, keeping the jobless rate at 11.6%. Retail sales were sluggish in July, falling 0.6% on top of a 0.7% June decline.
UK consumer confidence fell from -1 to -4 in Aug,
its weakest for the year so far.
Country Release Last Forecast
Aus Q2 House Prices 0.2% n/f
Q2 Capital Expenditure -3.8% 6.0%
US Jul Personal Income/Spending 0.5%/0.8% 0.5%/1.2%
Initial Jobless Claims w/e 27/8 315k 310k
Jul Construction Spending -0.3% 1.0
Aug ISM Manufacturing 56.6 56.5
Eur Aug PMI Manufacturing 50.8 51.5
Jul Unemployment 8.7% 8.7%
ECB Repo Rate Decision 2.0% 2.0%
UK Aug House Prices, Nationwide 0.2% 0.3%
Aug PMI Manufacturing 49.2 49.5
Latest Research papers/Publication
NZ Weekly Forex Outlook (29 August)
NZ Weekly Interest Rate Wrap-up (29 August)
NZ Superannuation Fund: An Update (24 August)
NZ Weekly Forex Outlook (22 August)
NZ Weekly Interest Rate Wrap-up (22 August)
Pre-election Economic and Fiscal Update (18 August)
NZ Weekly Interest Rate Wrap-up (16 August)
NZD: A Commodity Story (15 August)
NZ Weekly Forex Outlook (15 August)
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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