Thursday September 8, 2005 - 21:45:37 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar: NZD weighed by NZD/AUD sell-off
With the NZD unable to regain 0.7100, the currency remained pressured during the domestic session yesterday as easing oil prices continue to support a USD recovery. While a mild improvement was seen from intra-day lows of 0.7032, heavy selling on the AUD cross capped upside potential. This theme also persisted during the overnightsession with NZD/USD sticking to a tight 0.7030 - 0.7068 range, while a break higher in the AUD saw the NZD further pressured on the cross. Notably, NZD/AUD has shed over 1% over the last two days moving from around 0.9235 to current levels at 0.9125.
Australian Dollar: AUD breaks 0.7700 after jobs data
A better than expected employment report capped off a good week for Australian data yesterday. The creation of 32,600 jobs in August against expectations of a loss of 7,500 has pushed the Australian unemployment rate to a 30 year low of 5.0%. As a result the currency posted gains across the board, with marked strength seen against the NZD and CAD. Once again, AUD/USD targeted 0.7700 and while 0.7699 capped during the local session, the currency broke higher overnight pushing on to highs of 0.7734.
Major Currencies: US dollar edges higher to claw back losses
Thursday saw the USD continue its theme for the week and extended its rebound to post another day of gains against the major currencies. Market participants have now conceded the Federal Reserve will probably continue on its tightening cycle, providing the USD with more investor support. The euro
drifted for the early part of Thursday, however after touching the high at 1.2453, it weakened during offshore trading and moved down to 1.2382; we open today at 1.2400. In Japan polls suggest Prime Minister Koizumi with his reform agenda, will winSunday's election. This lead to some profit taking on the recent short USD positions and boosted USD/JPY
from 110.00 to 110.64 before closing at 110.50. The Sterling
traded its own inimitable style yesterday and although volatile was directionless. The BoE kept rates on hold and Sterling trading was choppy; price action was between support at 1.8330 and 1.8450. GBP/USD weakened late in the day to close at 1.8350.
Japanese July machinery orders fell 4.3%.
Both manufacturing and services industries reduced their orders in the month, as did the public sector. Overseas orders were up strongly.
The Bank of Japan left policy unchanged, as expected.
The 7-2 vote indicates that no one has shifted to the hawkish camp.
US initial claims fall 1k to 319k,
but the Labor Dept warned that the figure will almost certainly be revised. About 10k of the 319k initial claims were attributed to jobs lost due to Hurricane Katrina, but the Dept saidthat many claims offices were closed: as they reopen, retrospective claims will be filed leading to likely upward revisions in coming weeks. The level of claims could conceivably rise to 400k or higher within weeks; our forecast is for a jump to 360k in next week's report. The scale of the jump over the next two weeks will be a guide to the likely hit to Sep non-farm payrolls. Our preliminary forecast is for a 200k decline in jobs (i.e. a 400k subtraction from the Gulf Coast, assuming a 200k starting point whole economy gain).
US wholesale inventories fell 0.1% in Jul,
the first fall in 18 months in July, a very weak start to Q3, and providing offset to the recovery in factory stocks. Retail inventories will likely also be weak due to surging auto sales, so thus far at least, it does not look like stockbuilding is making much of a contribution to the Q3 growth story.
Canadian IVEY PMI rises from 51.5 to 54.1 in Aug.
The 2.6 pt gain in the Ivey PMI is less than we normally see in Aug in this not seasonally adjusted series, so the result should be seen as somewhat soft. Other data included a below trend 0.2% rise in house prices in July, and a slight uptick in capacity utilisation.
The Bank of England left rates on hold at 4.5%
following this week's policy meeting. We do not expect another rate cut this year.
Country Release Last Forecast
NZ Q2 Building Work 6.2% 1.0%
US Aug Import Prices 1.1% 1.5%
Jpn Aug Consumer Confidence 46.8 46.0
UK Jul Trade Balance £bn -4.3 n/f
Can Aug Employment ch' 6k 25k
Aug Housing Starts 243k 230k
Q2 Labour Productivity 0.2% -0.2%
G7 Jul OECD Leading Index 101.6 n/f
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)
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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