Tuesday November 1, 2005 - 20:39:28 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar: NZD in holding pattern
The NZD initially drifted lower during yesterday's local session and held near one-week lows of 0.6980/90 for the remainder of the day, lacking direction ahead of this morning's Federal Reserve meeting. Given wide expectations of a hike, the NZD/USD held a reasonably tight range as the market remained keen to see what is said in the accompanying statement. Despite this the NZD did manage upward progress against the yen and AUD.
Australian Dollar: Diva captivates ahead of RBA performance
Yesterday's Australian PMI indicated manufacturing activity contracted in October and suggested that domestic demand may have slowed further and that the export recovery is being hurt by the high AUD. The AUD drifted steadily lower during both domestic and overnight sessions to a low of 0.7440 ahead of the Fed decision however activity did slow noticeably in the afternoon for the running of the Melbourne Cup. The market awaits today's RBA policy announcement, however no change is widely expected.
Major Currencies: USD holds gains ahead of Fed rate decision
The USD held Monday's gains against major currencies last night ahead of the Federal Reserve rate decision this morning. Market commentators and participants were widely expecting a 12th straight rise in US interest rates at 8.15am (NZT) this morning and were not disappointed as the Fed funds rate was taken to 4.0% from 3.75%.
Overnight, the USD/JPY posted a fresh 116.78 high following a better than expected US ISM manufacturing reading for October, the USD/JPY opens this morning near its highs at around 116.60. The euro was up against the USD last night ahead of the Fed rate announcement, after sliding one cent on Monday. Opening at around 1.2005 the euro softened following the Fed this morning breaking 1.2000 to around 1.1990.
The Federal Reserve lifted the fed funds target by 25bps to 4.0%
following last night's FOMC meeting. The statement included further discussion of the impact of the hurricanes and Gulf Coast reconstruction. However the main elements of previous statements monetary policy accommodative, longer term inflation expectations contained, growth and inflation risks roughly equal, and further measured hikes were all retained.
US ISM-manufacturing slips from 59.4 to 49.1 in Oct.
The ISM held on to most of its impressive Sep gain in Oct, suggesting that it was not just unrealistic enthusiasm about reconstruction opportunities that drove Sep's jump. Output and orders slipped a little, but remained well above 60, while the jobs index rose to an eight month high. Prices continued to accelerate, though not as sharply as in Aug and Sep, and there was continued evidence of significant shipping delays, which we suspect is related to the Katrina aftermath. These latter two factors will add to concern about emerging inflationary pressure.
US construction spending rose 0.5% in Sep
and was revised higher earlier in Q3, slightly at odds with the fall in investment in structures and the weaker contribution from housing in the Q3 GDP report last week. There was no separate estimate for Gulf Coast reconstruction; the clean-up operation is not classified as part of construction spending.
The Euroland PMI rose to 52.7 in Oct,
up for the fifth month running, and now indicating the strongest pace of expansion in the European industrial sector for thirteen months. Output and orders were both stronger; the input and output price measures accelerated. Also, there were unconfirmed reports of a 36k fall in German unemployment; the report was not due till tonight.
The UK manufacturing PMI rose to 51.7 in Oct,
making it three consecutive monthly gains. Also, the CBI retail survey was less weak last month, and the Nationwide reported a sharp jump in house prices, after a string of weaker results.
Country Release Last Forecast
NZ Sep Building Consents 6.8% 2.0%
Aust RBA Policy Announcement Window 5.5% 5.5%
Sep Dwelling Approvals -8.0% 5.0%
Jpn Oct Base Money %yr 1.7% n/f
Eur Oct PMI Manufacturing 51.7 53.0
Ger Oct Unemployment ch '000 39 n/f
UK Oct PMI Construction 57.2 n/f
Latest Research papers/Publication
NZ Weekly Interest Rate Wrap-up (1 November)
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)
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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