Tuesday September 6, 2005 - 00:38:39 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar: NZD rallies above 0.7100
The ongoing re-evaluation of the pace of US interest rate increases following Hurricane Katrina continued to pressure the USD yesterday. The NZD benefited from this negative USD sentiment, extending gains during the domestic session to highs of 0.7100. With the US closed for the Labor Day holiday, the market rallied further during the offshore session and the NZD strengthened to overnight highs of 0.7123, its highest levels since the end of June. The currency opens off its overnight highs this morning at 0.7090.
Australian Dollar: AUD firm ahead of RBA meeting
The AUD also benefited from continued USD weakness yesterday. Domestically, stronger than expected Q2 business inventories data boosted the currency, while the TD Securities Inflation Index for August registered an annualized rate of 3.1 %, above the RBA's target range of 2-3%. Locally, the AUD established highs of 0.7697 but failed to build on these during the holiday-affected offshore session. With the Reserve Bank Board meeting today, the currency opens this morning at 0.7675
Major Currencies: Dollar punished while markets wait for the Fed
The US dollar was trading at three-month lows against the euro and almost four-month lows against the Sterling yesterday as markets questioned the economic impact of Katrina. Market participants are betting the Federal Reserve will not continue on its interest rate tightening cycle. Only one more hike has been priced in for the remainder of the year, a sharp turn around from the three hikes prior to the hurricane. This has weighed on the USD and confirmation from the Fed will hurt the dollar even more. However many market commentators still believe the Fed will continue hiking rates, we await Wednesday and Thursday night's Fedspeak for further insight. The euro
strengthened from 1.2540 to 1.2581 during NZ time but weakened offshore to close at 1.2530. The Sterling
was impressive in its rally from 1.8420 to 1.8498 but met resistance there and trailed off to close at 1.8435. The yen strengthened against the USD, moving from 110.06 to 108.75 and opens today at 109.20.
Q2 MoF survey points to healthy Japanese capex spending.
The MoF reports that nominal capital spending ex-software rose 1.7% s.a. from Q1. The unadjusted data implies a 6.7%yr pace ex-software, and a 7.3% pace overall. These numbers offer support for the strong non-residential investment estimate reported in the preliminary national accounts a fortnight ago. Based on this data, we do not expect major revisions when the second estimate is released next week.
US holiday: no data.
Euroland services PMI slips from 53.5 to 53.3 in Aug.
Despite the modest overall slippage, this masked diverse national performances, with Italy contracting again, Germany accelerating and France the strongest, but slower than in the prior three months. With the manufacturing PMI also lower in August, the composite index fell from 53.2 to 52.7, its first decline in three months.
UK services PMI slips from 56.3 to 55.2.
This was a little disappointing, but it leaves the PMI within the 55-57 range which has prevailed for the past year or more. Whilst a bounce in the Sept PMI would not surprise, we can speculate that the London bombings back in July might have impacted on the services sector in the capital since then.
Country Release Last Forecast
Aust Q3 WBC-ACCI Industrial Trends 54.5 n/f
Jul Housing Finance (no.) -0.9% -3.5%
Q2 Public Sector Spending -0.5% 1.0%
US Aug ISM Non-Manufacturing 60.5 58.0
Jpn Jul Household Spending %yr -0.1% -3.5%
Eur Aug Retail PMI 51.0 n/f
Ger Jul Factory Orders 2.2% n/f
UK Jul Industrial Production flat 0.2%
Aug BRC Retail Sales Monitor
Latest Research papers/Publication
NZ Weekly Forex Outlook (5 September)
NZ Weekly Interest Rate Wrap-up (5 September)
Oil: RBNZ in sticky situation (2 September)
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)
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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