Monday September 19, 2005 - 21:57:50 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar: NZD: Political uncertainty weighs heavy
The NZD struggled to keep its head above 0.70 US cents on Monday, weighed down by a market with little tolerance for political risk. With the shape of the new government currently in limbo, the NZD suffered from the uncertainty and weakened across the board. NZD/USD weakened to an 18-day low at 0.6971 and NZD/AUD traded a 39-day low at 0.9128, it could have been worse but for a quiet day due to a Japanese holiday. NZD/USD gapped lower on the open from 0.7045 to 0.7025 then traded a touch below 0.7000 for most of the local session. The market was content to let the NZD trade between 0.6971 and 0.7018 offshore before closing at 0.7000.
Australian Dollar: AUD plays follow the leader
The AUD took a back seat yesterday and tracked the euro and NZD due to a lack of local data to provide direction. AUD/USD was taken lower on the open and sold-off to an 18-day low from 0.7670 to 0.7615; worrying signs from the German and NZ elections and USD buying ahead of today's FOMC meeting the catalysts. Both the euro and AUD displayed resilience and rebounded strongly late in the day as short positions were squeezed out of the market. The AUD managed to regain its intraday losses, rallying back to 0.7678 and closing at 0.7669.
Major Currencies: Euro weakens on political stalemate
dropped to a seven-week low against the dollar during Monday's offshore session after Germany's election ended in a stalemate. The election result has raised concerns that the government will fail to enact policy changes that will bolster faltering economic growth. The euro traded a 1.2100 low on the German political concerns coupled with the expectation of a further Federal Reserve interest rate hike tonight, widening the yield gap with the European Central Bank. The euro opens off its lows this morning at around 1.2150. Commodities prices surged last night and US equities dropped on concerns another tropical storm "Rita", might disrupt fuel production in the Gulf of Mexico. Energy, oil and gold prices drove the Reuters/Jefferies CRB index up 3.8 percent, its biggest gain since 1974.
US Homebuilders index edges down.
The National Association of Home Builders' September index edged down from 67 to 65, its lowest level in 2 years but still in expansionary territory above 50. The fall in sentiment is not unique in the wake of the hurricane, given softer consumer and business sentiment. Consumers in areas unaffected directly by the hurricane have had to weather high energy prices, and timber prices has jumped in the hurricane aftermath.
German election result also unclear.
In a dose of déjà vu for NZ voters, the preliminary German election outcome has produced a virtual dead heat between the reformist-minded Christian Democrat bloc and the incumbent Social Democrats. Both parties now look likely to negotiate with other parties to attempt to put together a ruling coalition, and one possibility remains that they may be forced to unite their parties in a grand coalition.
Country Release Last Forecast
US Aug Housing Starts -0.1% 2.0%
Aug Housing Permits 1.8% -2.0%
FOMC Meeting 3.50% 3.75%
ABC Consumer Confidence w/e 18/9 -20 n/f
Eur Jul Trade Balance EURbn nsa 6.5 n/f
Ger Sep ZEW Survey 50.0 40.0
UK Aug M4 Money Supply %yr 11.5% n/f
Aug PSNCR GBPbn -8.2 3.3
Can Jul Wholesale Sales 0.5% 0.6%
Aug Leading Index 0.3% 0.3%
Latest Research papers/Publication
• NZ Q2 Current Account Preview (19 September)
• NZ Weekly Forex Outlook (19 September)
• RBNZ Sep MPS Review (15 September)
• NZ Q2 Terms of Trade Review (12 September)
• NZ Weekly Forex Outlook (12 September)
• NZ Weekly Interest Rate Wrap-up (12 September)
• RBNZ Sep MPS Preview (9 September)
• NZ Agribiz September 2005
These papers/publications are available on Online Research on
Westpac Institutional Bank’s 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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