Thursday September 29, 2005 - 21:37:07 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar: Strong headline GDP data boosts NZD
From opening levels at 0.6865 yesterday, the NZD rallied strongly following the release of Q2 GDP. While revisions to previous quarters brought the annualised rate in at 3.1%, below market expectations of 3.3%, the headline number of 1.1% surpassed expectations of 0.7% and led to the pricing in of a 7% cash rate for Oct 27. As a result, the NZD was marked higher across the board, with gains against the USD peaking at 0.6920 during local trade. Although these gains were extended to 0.6939 during the offshore session, the currency has pulled back slightly to open this morning at 0.7610.
Australian Dollar: Commodity prices support AUD
The AUD also continued its recent recovery against the USD yesterday. With attention focused on NZ's GDP number, the market paid scant attention to news of a 3.9% fall in Q3 job vacancies, with the currency trading a narrow range of 0.7579 - 0.7607 during the local session. However, with copper prices in London reaching a record $3,835/tonne and gold eying $500/oz the AUD remains supported and was lifted to an intraday high of 0.7625 during offshore trading.
Major Currencies: Dollar gains on surprising data
Z The USD gained slightly overnight as the released weekly jobless claims report showed a decrease in claims, a surprising result given Hurricanes Katrina and Rita. The euro fell sharply on the news, eventually reaching a low of 1.2006. Buying from Asia was noted as the reason the euro did not re-test the 1.2000 level, still seen as key support. The euro recovered in late New York trading however, and opens this morning around 1.2045. Sterling followed a similar path to the euro, after bottoming out at a two-month low at 1.7592. Elsewhere, the JPY was fairly quiet, marginally losing ground to the USD and opens this morning around 113.00.
Japanese retail sales up 1.5%yr in Aug.
This was not far from expectations, and is consistent with the stronger tone of consumer related data in the year to date.
US Q2 GDP growth unrevised at 3.3% annualised.
GDP revisions were minor and offsetting, although the breakdown as it now stands shows slightly stronger domestic spending, and slightly weaker net exports and inventories. The inflation measures were mostly revised a little higher. But focus is more on next month's Q3 GDP advance release; we expect an annualised growth rate a little below 3%, with the hurricanes' impact shaving up to 1 ppt off the growth rate.
US initial jobless claims fell 59k to 356k last week,
even though the Labor Dept estimated that a further 60k claims were Katrina-related. But that does not mean that the "true" claims number was actually 296k, because the approach of hurricane Rita meant that many claims could not be filed, especially in Houston which was largely evacuated. Expect a sharp jump in next week's number, and/or an upward revision to this week.
German unemployment rose 39k in Sep.
But statistical changes mean that this figure masks a further unemployment fall of 22k. But that fall, in turn, reflects the long-term unemployed being given heavily subsidised jobs, so the underlying jobs story remains cloudy. Also, Spanish inflation jumped from 3.3% yr to 3.7% yr in September, another sign that the flash estimate of the Euroland CPI tonight will be much higher than August's 2.2% yr.
UK data mixed. Mortgage lending picked up smartly in August, confirming that the rate cut at the start of the month has seen some renewed life in the housing market. Consumer credit remained sluggish however, consistent with depressed retail sales.
Country Release Last Forecast
NZ Aug Dwelling Consents -7.2% 7.0%
Aust Aug Retail Sales 0.0% 0.4%
Aug Credit 0.5% 1.1%
US Aug Personal Income/Spending 0.3%/1.0% 0.3%/-0.5%
Aug Core PCE Deflator 0.1% 0.1%
Sep UoM Consumer Sentiment (F) 76.9a n/f
Sep Chicago PMI 49.2 52.0
Jpn Aug National CPI %yr -0.3% n/f
Aug Unemployment Rate % 4.4% n/f
Aug Industrial Production % mth -1.2% n/f
Eur Sep CPI Flash Estimate % yr 2.2% 2.4%
Can Jul GDP 0.2% 0.2%
Latest Research papers/Publication
Economics vs sentiment (29 September)
NZ Q2 GDP Review (29 September)
NZ Weekly Forex Outlook (26 September)
NZ Weekly Interest Rate Wrap-up (26 September)
NZ Q2 GDP Preview (23 September)
NZ Q2 Current Account Review (21 September)
NZ Q3 Consumer Confidence (21 September)
NZ Weekly Interest Rate Wrap-up (20 September)
NZ Q2 Current Account Preview (19 September)
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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