Thursday October 6, 2005 - 20:34:21 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar: NZD grind higher ahead of US payrolls
While recent outperformance has been seen on the crosses with the NZD particularly strong against the yen and euro, a substantial rebound in the European single currency yesterday saw the NZD again appreciate against a weaker USD. During local trade the currency climbed from early lows of 0.6929 to an intraday high of 0.6984. Overnight, the rally was extended to 0.7006, before gains were eroded and the NZD settled back to 0.6970. Market attention is now focused on tonight's release of September's US non-farm payroll report, which will be heavily impacted by Hurricane Katrina. While there is considerable uncertainty surrounding the number, it should be noted that today will see a shortened session in New York ahead of Monday's Columbus Day holiday and volatile trade is likely.
Australian Dollar: Risk aversion stifles AUD
Despite gold prices at $475/oz and record copper prices, the AUD continues to struggle, with risk averse positioning in the currency markets ahead of tonight's non-farm payrolls favouring traditional safe haven currencies over the commodity bloc. Yesterday's re-positioning into euros and Swiss Francs pressured the USD, allowing the AUD to maintain familiar levels and shrug off a sharp correction in Australian equities. From yesterday's lows at 0.7552, the currency established an overnight high of 0.7603 and is seen this morning at 0.7585.
Major Currencies: USD suffers ahead of payrolls
Z The euro made its biggest percentage gain in more than three years yesterday as the USD was sold heavily on technical driven trade. After opening around 1.1960 in yesterday's domestic session, the euro was bought steadily to a 1.2060 intraday high and taken higher testing 1.2200 resistance offshore. The euro’s move was a result of a short squeeze following its decline earlier in the week and of the market anticipating a negative US payrolls number tonight. The USD was also down against the yen, with the USD/JPY opening this morning at around 113.15 down from yesterdays 114.19 high.
US initial claims rise 21k to 390k,
though much of the rise reflected claims from earlier in September that were delayed because of hurricane Rita. The Labor Dept estimated that 74k of the week's 390k claims were hurricane-related (mostly Katrina), which implies an underlying level of 316k, consistent with still robust labour conditions in most of the country.
Canadian Ivey PMI rises to 67.3 in Sept.
The Ivey index is not seasonally adjusted, and usually rises in September, but even taking that into account, the 13 pt gain makes it is clear that Canadian manufacturers are sharing the enthusiasm of their counterparts south of the border (recall the US ISM manufacturing jumped on Gulf Coast reconstruction hopes).
The European Central Bank left rates on hold at 2.0%
following last night's Council meeting. The statement noted that upside inflation risks had increased and that "strong vigilance" would be required to ensure that inflation expectations remained well contained. This was upgraded from "particular vigilance" last month. Also, in the press conference Q&A, ECB chief Trichet made it clear that the Council considered the "pros and cons" of a rate rise, and hinted that a rise could come at any time if the ECB assessed that inflation expectations were accelerating.
Slightly softer European data.
German orders fell 3.7% in Aug after three very strong months, and the Euroland retail PMI dipped back below the neutral 50 level, suggesting that August's 0.9% retail sales gain won't be repeated in September.
The Bank of England left rates on hold at 4.5%
following this week's Council meeting. As expected, no statement was issued in line with usual practice.
Mixed UK data.
Although industrial production fell 0.9% in Aug this was mainly due to disrupted mining output due to summer shutdowns and a fire at an oil field. Also, there was a surprising 1.2% jump in UK house prices in Sept according to HBOS, at odds with other surveys.
Country Release Last Forecast
US Sep Non-Farm Payrolls ch 169k -200k
Aug Wholesale Inventories -0.1% 0.5%
Aug Consumer Credit USDbn 4.4 3.0
Jpn Aug Household Spending %yr -3.7% n/f
Ger Aug Industrial Production 1.2% 1.0%
Can Sep Employment ch 28k 15k
G7 OECD Leading Index 102.3 n/f
Latest Research papers/Publication
• NZ Q3 Employment Confidence Index (5 October)
• NZ Weekly Forex Outlook (3 October)
• NZ Weekly Interest Rate Wrap-up (3 October)
• Economics vs sentiment (29 September)
• NZ Q2 GDP Review (29 September)
• NZ Weekly Forex Outlook (26 September)
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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