Thursday October 27, 2005 - 20:17:21 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar: NZD higher despite muted reaction to OCR rise
Initial reaction to the RBNZ's much anticipated increase in the OCR to 7.00% yesterday was muted with the NZD softening slightly after the announcement. The market remained pressured as USD/JPY moved above 116, with the NZD dipping briefly to an intraday low of 0.6998. The USD was then sold sharply however, as rumours circulated that General Motors was about to file for Chapter 11 protection. The NZD rallied strongly as a result, to a local session high of 0.7062. Further gains during the offshore session saw a high of 0.7089 established before General Motors issued a denial of the rumours. The currency opens this morning at 0.7060.
Australian Dollar: GM rumours lift AUD
A sharp reversal in the AUD was also seen yesterday. After softening to a low of 0.7524, the GM rumours and adverse political impact from the possible indictment of White House officials over the Valerie Plame affair led to heavy USD selling. AUD/USD rallied to an intraday high of 0.7580 before pressing on to 0.7602 overnight. A denial by GM has seen a recovery in the USD, and the AUD trades this morning at 0.7575.
Major Currencies: Dollar retreats from two-year highs against the yen
The USD dropped against the euro and the yen as weaker than expected economic data and the political troubles of the Bush administration undermined confidence. The USD slid from a two year high of 116.24 against the yen to reach a low of 114.85. Adding to the dollar's woes were concerns about the health of General Motors after the car manufacturer was subpoenaed by the Securities and Exchange Commission. The euro rallied to a session high of 1.2174, helped by the comments from ECB council member Erkki Liikanen who reiterated the bank’s determination to be vigilant against inflation.Latest Research Papers/Publications
US durable goods orders fall 2.1% in Sep.
Durable goods orders fell away in Sep, mainly due to a 42% fall in aircraft orders, consistent with Boeing data. In the last few months, we have seen a clear resumption of the month to month volatility this series was once famous for. Although orders were still down even excluding transport, that needs to be seen in the context of the sharp rise in orders in Aug. The point is valid for core capital goods as well, down in Sep although the trend remains modestly positive.
New home sales rose 2.1% in Sep
but back revisions were substantially to the downside, shaving a cumulative 3.3 ppts off the recent sales total, although July was still the cyclical high for this series. The regional breakdown showed a bounce in sales in the south, consistent with anecdotal evidence of a post hurricane jump in buying, and very strong mid-west sales, but there were sharp falls in the northeast and the west. Given the importance of the housing boom and house price increases to the resilience of the US consumer, we need to keep watching this data for evidence that the housing story might be losing momentum.
US initial jobless claims fell 28k to 328k last week,
with 24k of these attributed to the hurricanes in the south (close to two months, ago now). That gives an underlying level of claims of 304k, consistent with a still strong job market in the rest of the country. Total Katrina related claims amount to a staggering 502k.
German consumer confidence rose from 3.1 to 3.4 in Oct,
according to the GfK index. This contrasts with recent declines in confidence in the US, UK and Australia, and adds to the sense that economic momentum may be picking up a bit on the continent..
Canadian Q4 business conditions.
After three negative quarters, the orders component of the survey rose, from -10 to 4. That is an indication that firms are anticipating stronger activity levels for the first time in a year.
Country Release Last Forecast
NZ Sep Merchandise Trade Bal NZDmn -1,105 -934
Aust Sep Merchandise Imports AUDbn 13.8 n/f
US Q3 GDP advance % ann'lsd 3.4% 3.6%
Q3 Employment Cost Index 0.7% 0.9%
Oct UoM Consumer Sentiment (F) 75.4p 76.0
Jpn Sep National CPI %yr -0.3% -0.6%
Sep Industrial Production 1.1% 0.3%
Eur Sep M3 Money Supply %yr 8.1% 8.3%
Oct Economic Confidence 98.6 99.1
Oct CPI Flash %yr 2.6% 2.6%
Latest Research papers/Publication
• RBNZ OCR Review (27 October)
• NZ Weekly Forex Outlook (25 October)
• NZ Weekly Interest Rate Wrap-up (25 October)
• RBNZ October OCR Preview (19 October)
• NZ Economic Overview October 2005 (18 October)
• NZ Q3 CPI Review (17 October)
• NZ Weekly Forex Outlook (17 October)
• NZ Weekly Interest Rate Wrap-up (17 October)
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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