Tuesday November 29, 2005 - 20:29:31 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar NZD holds above 0.70 US cents
The NZD was staunch in the face of positive US economic data yesterday and held onto the 0.7000 handle for much of the day. The NZD has remained strong over the past week, gaining ground on all major currencies helped by the yield attraction and despite market commentators’ warnings of a hard landing for the economy. High interest rates have attracted investment from offshore markets and have provided huge buying demand for the NZD. However some economists are warning of a sharp slowdown next year if interest rates are pushed too high by the RBNZ and if consumer spending doesn’t subside. The NZD opened around 0.7010 and rallied to 0.7072 immediately. The currency drifted lower for the remainder of the day, touching 0.6994 briefly before closing at 0.7010.
Australian Dollar: AUD/USD sold back below 0.7400
After rallying strongly on Monday, the AUD gave back most of its gains on Tuesday to trade at levels similar to late last week. The AUD opened at the high of 0.7454 and, with no local data releases, moved consistently lower throughout the day on the back of notable sellers out of the US and Japan. More good data out of the US encouraged a bounce in the USD and by consequence the AUD suffered further overnight, trading to a low of 0.7373.
Major Currencies: Correction short lived as strong data boosts USD
After Monday’s sharp USD correction, the currency recovered from lows of 1.1903 and 118.34 against the euro and yen during yesterday’s trade. Better than expected durable goods orders, consumer confidence and record new home sales data led traders to speculate that an end to the Fed’s tightening cycle was still be some way off, boosting the USD. Comments from the French Finance Minister Thierry Breton that an ECB rate rise is unnecessary also undermined the euro, which dipped to an overnight low of 1.1738.
Japanese data: industrial production up 0.6% in Oct;
Oct unemployment rate jumped 0.3ppts to 4.5%.
US consumer confidence bounces.
The Conf Brd measure rebounded off a 2-year low with great vigour, up to 98.9 from 85.2 to recover two thirds of the decline from pre-hurricane levels – and blowing well through the 90 expected. The bigger driver of the improvement was the expectations component, with current conditions still lagging Aug's level considerably. Jobs measures showed only slight improvement, with much of the survey lift coming from the perception that business conditions and incomes would improve ahead, perhaps a reflection of receding gas prices. The recovery does add to the Fed's view that the hurricanes are largely a temporary headwind.
US durable goods orders also up.
Oct orders rebounded 3.4%, on the strong side of the 1.5% the market expected. Aircraft were partly behind the increase, contributing to an 11.4% increase in transport orders. Ex-transport orders were soft at 0.3%, though offset by upward revision to Sep's tally. Signalling pent-up demand is growing, unfilled orders continued to rise – up 1.5%. Shipments also picked up 1.4% after being held to flat during Boeing's Sep strike. All in all, with orders up 11.1% from a year ago capital spending should remain supportive of growth.
US Oct new home sales boom.
Sales jumped 13% from Sep, well defying expectations of a mild fall to match other housing data that have weakened of late. Price growth did pull back to 1% y/y from 7% in Sep and well down from the start of the year. With mortgage rates up and affordability low, we do expect the market will dampen ahead. Eurozone money supply growth slows. Oct growth slowed to 8.0% from 8.4%, softer than expected but unlikely to deter the ECB from a likely tightening Thursday night.
Date Country Release Last Forecast
NZ Oct Dwelling Consents %mth -2.4% 5.0%
Aust Oct Retail Trade –0.3% –0.2%
Q3 Construction Work Done 4.0% 0.5%
Oct Credit 0.8% 0.9%
US Q3 GDP % annualised (Prelim) 3.8% a 3.9%
Nov Chicago PMI 62.960.0
Fed Beige Book
Eur Q3 GDP Revision 0.6%a 0.6%
Nov CPI Estimate %yr 2.5% n/f
Ger Nov Unemployment chg –36k n/f
Latest Research papers/Publication
• NZ Weekly Forex Outlook (28 November)
• NZ Weekly Forex Outlook (21 November)
• NZ Q3 Retail Sales Review (15 November)
• NZ Weekly Forex Outlook (14 November)
• NZ Housing Equity Withdrawal (10 November)
• NZ Q3 HLFS Review (10 November)
• NZ Q3 QES and LCI Review (8 November)
• NZ Weekly Forex Outlook (7 November)
• NZ Weekly Interest Rate Wrap-up (7 November)
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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