Monday January 23, 2006 - 21:44:05 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar NZD regains ground during holiday
The NZD opened the domestic session yesterday near its low of 0.6789 but managed to claw its way back through 0.6800 by mid morning, capitalising on USD weakness. By late afternoon the NZD had hit a high of 0.6845 after the euro rallied offshore which in turn triggered stop-loss buying of NZD above 0.6820. Overnight the currency traded in a tight 0.6830-0.6856 range and opens this morning around 0.6835.
Australian Dollar: AUD enjoying the ride
The AUD jumped on Monday as the USD was hit by a wave of selling, sparked by heightened risk aversion in the face of rising oil prices and a major sell-off on Wall Street. After opening on its lows the AUD climbed to a high of 0.7535 with little reaction to the producer prices data which showed a further moderation in prices in the fourth quarter. Overnight the currency reached a one week high of 0.7543 and opens this morning around 0.7533.
Major Currencies: Uncertainty sees USD sold
Continuing global uncertainty saw the USD slip away against its major trading partners on Monday. Sparked by concerns over Iran’s comments on diversifying out of US dollars, the euro and Sterling both rose sharply just after midday in the local session. After hovering around 1.2240 through to the close, the euro was then bought again, briefly pushing through 1.2300 before retracing slightly. European currencies weren’t the only ones to benefit as the JPY also performed strongly, gaining 0.8% on the day. JPY opens around 114.50 this morning.
US leading index up 0.1% in Dec.
The main component features of the report were strong positives from consumer expectations and money supply, offset partially by negatives from supply times, building permits and orders, although the orders decline was assumed as the relevant data have yet to be released. In fact, November's index was revised up sharply from 0.5% to 0.9% due to the subsequent release of very strong durable orders data for that month - entirely due to Boeing. And with Boeing orders figures even stronger in Dec, that assumed orders fall may be pessimistic, making it likely that Dec's leading index report will need to be revised higher next month.
Speaking in London, NY Fed president Tim Geithner said that the US current account deficit is unsustainable: "something has to give eventually... with some risk of ... greater volatility in asset prices and periods of slower growth in the US" and elsewhere. That is a less sanguine view than has been expressed recently by outgoing Fed chairman Alan Greenspan. And St Louis Fed president William Poole thinks "we are in a very stable inflation environment". Discussing market pricing of one or two more quarter point hikes, he said "that's a perfectly sensible forecast". Poole voted last year, but will not this year, on the FOMC.
Canadian retail sales stronger than expected.
The already known solid gain in auto sales lifted total retail sales by 1.1% in Nov. This was much stronger than expected because the drag on sales values from lower gasoline prices, while significant, was not as great as generally forecast. Ex autos & gasoline, sales rose a reasonable 0.6%, with solid rebounds in clothing and building materials sales featuring.
Klaus Liebscher, Austrian central bank chief and ECB council member,
made some hawkish comments. He said that the 2.25% repo rate was "very, very low" and that rate direction from here was "indisputable", although he added that rates would be increased again "if and when necessary".
Date Country Release Last Forecast
24 Jan Aust Dec New Motor Vehicle Sales 2.2% 1.0%
US Jan Richmond Fed Index –2 5
Jpn Nov Tertiary Activity Index 1.2% 0.7%
Eur Nov Industrial Orders –0.5% 0.7%
UK Jan CBI Industrial Trends Survey –4 n/f
Can BoC Rate Decision 3.25% 3.50%
25 Jan Aust Q4 CPI 0.9% 0.6%
US Dec Existing Home Sales –1.7% –2.0%
Latest Research papers/Publication
• NZ Weekly Forex Outlook (23 January)
• NZ Q4 CPI Review/OCR Preview (18 January)
• NZ Q4 QSBO Review (17 January)
• NZ Weekly Forex Outlook (16 January)
• NZ Weekly Interest Rate Wrap-up (16 January)
• NZ Q4 CPI Preview (13 January)
• NZ Q4 Employment Confidence Index (11 January)
• NZ Weekly Forex Outlook (9 January)
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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