Tuesday November 1, 2005 - 00:45:54 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar: NZD gets fresh direction
Yesterday was free of any significant economic data or events during our domestic session and the NZD again found itself stuck within a narrow 20bps range. However the same could not be said overnight with NZD/USD moving steadily from its high of 0.7057 to a low of 0.6988. This fresh direction comes ahead of the Federal Reserve's widely anticipated rate hike.
Australian Dollar: Cup fever hits AUD
The AUD again found itself in a similar tight range to the NZD in the local session yesterday despite Australian Credit growth moderating in September to 0.8% as expected and the October inflation gauge moving down 0.1%. The AUD sold off from 0.7523 to 0.7466 overnight as the RBA remains set to hold rates steady, the Fed to raise rates and the ECB expected to inch closer to raising their rates this week. A quiet afternoon is likely today with the Melbourne Cup running temporarily halting any further declines.
Major Currencies: Strong data takes USD to new highs vs the yen
The USD surged during Monday's offshore sessions posting a 25- month high against the yen and making sharp gains against the euro. A string of robust economic data was the catalyst for the dollar move including a higher than expected reading for business activity in the US Midwest, a jump in US personal income and a rise in core inflation for September. The data reaffirmed the view that the US economy remains on a solid growth track and that the Fed's measured tightening campaign will persist. The USD/JPY t
raded a new 25-month 116.45 high following the US data despite the Bank of Japan raising its forecasts for prices and economic growth. The euro
also lost ground against the USD breaking 1.2000 support, trading a 1.1968 low. TheUSD/JPY opens this morning near its overnight highs at around 116.40 and the euro opens slightly stronger at around 1.1985.
US real personal spending for September posted a 0.4% m/m decline
the second consecutive monthly drop compared to a headline (nominal) 0.5% rise over August. Incomes rebounded in September, rising 1.7% m/m, following the sharp Katrina-related drop in August (of a revised -0.9%). The soft spending number suggests that consumer spending into Q4 is feeling the effect of higher fuel prices.
US core PCE deflator rose 0.2% m/m and 2.0% y/y in Sep.
Core inflation looks to be contained at this stage with the 3mma PCE deflator still on the soft side, consistent with the view that limited pass through of higher fuel costs has occurred thus far.
US Chicago PMI rose to 62.9 in Oct.
Improvements were evident across the board and the overall PMI was significantly higher than the market expectation of 57.4. This adds to market talk that Q4 growth dependence on a supply side pick up will increase, rather than consumption.
UK Mortgage lending picked up to its highest level in 15 months
with 107K mortgage approvals in September and net mortgage lending up by GBP0.1bn to GBP7.7bn, consistent with recent data suggesting a modest recovery in the housing market. In contrast, the GfK Consumer Confidence index fell to -8 in October from -5 the previous month, tempering ideas of a consumer rebound.
Country Release Last Forecast
Aust Oct AIG PMI 52.9
Melbourne Cup Makybe Diva Eye Popper
US Oct ISM Manufacturing 59.4 58.0
Sep Construction Spending 0.4% 0.8%
FOMC Meeting 3.75% 4.0%
Eur All Saints Day
UK Oct House Prices, Nationwide -0.2% 0.5%
Oct PMI Manufacturing 51.5 52.0
Oct CBI Distributive Trades Survey -24% n/f
Latest Research papers/Publication
NZ Weekly Forex Outlook (31 October)
RBNZ October 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 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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