Thursday February 2, 2006 - 01:22:42 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar: NZD: Up and back
The NZD was buoyed during the local session yesterday due to interest rate concerns out of the US and some better than expected data on the local front. Opening the day around 0.6850 NZD initially dipped as the US Fed raised interest rates, but a less-than-convincing statement then saw NZD quickly bought higher. Spurred on by local data later in the morning, NZD spent the afternoon trading around 0.6875. NZD couldnâ€™t hold onto its gains overnight however as US investors bought back dollars across the board. NZD opens this morning around 0.6845.
Australian Dollar: AUD falls in choppy trade
The AUD shared a similar path to NZD during yesterdayâ€™s trading. Upon the Fed interest rate rise AUD was sold to 0.7540 but quickly recovered to make its high for the day at 0.7588. From there it was choppy downward trading, when support at 0.7560 was broken selling intensified. AUD opens this morning around 0.7535, having marginally recovered from its overnight low.
Major Currencies: USD posts new high vs Yen, euro falls.
The USD climbed to a new 2006 high against the Yen on Wednesday following the Federal Reserve rate decision. The USD was broadly stronger on Wednesday after the Federal Reserve hiked fed funds for the 14th consecutive time to 4.50% and left the door open for further monetary policy tightening. As a result, the USD/JPY rallied breaching options barriers at around 118.00 posting a 118.13 high. The Euro also slipped against the USD undermined by weaker than expected euro zone manufacturing data, down 0.7% on the day and opening this morning near its lows at around 1.2070.
US ISM manufacturing slips from 55.6 to 54.8 in Jan.
The ISM slipped for the third month running, though not by quite as much as our 54.5 forecast. The decline was consistent with the lower headlines for the major regional manufacturing surveys. Despite the latest drift lower, the orders and output components of the ISM remain stronger than the headline, so it is likely that reasonably robust industrial production outcomes will be continue to print through early 2006 (outside utilities due to unseasonally warm weather).
US construction spending posted a 1.0% gain in Dec,
much higher than assumed by the Commerce Dept in the Q4 GDP report. Also, November was revised up by 0.3 ppts. So expect an upward revision to the housing component of Q4 GDP. In contrast, pending home sales fell 3% in Dec. This measure of activity in the established dwelling market has fallen for five of the past six months, and points to continued softness in existing home sales data heading into this year.
Slightly less upbeat European data:
the manufacturing PMI failed to post a further gain in January - its first slippage (though only 0.1 pt to 53.5) since August last year. Although Germany continued to power ahead, rising from 53.6 to 55.0, France slowed from 52.2 to 50.7, emphasising the point that the industrial recovery across Europe is patchy rather than broad-based. Unemployment edged higher too, to 8.4% in Dec, confirming that the 2005 downtrend in the jobless rate had stalled by the end of the year.
The UK PMI rose from 51.3 to 51.7 in Jan,
suggesting that some sort of modest industrial sector recovery is trying to break through, even if it is not yet being captured in the official industrial production data.
Date Country Release Last Forecast
Aust Dec Dwelling Approvals 3.4% 1.0%
US Q4 Productivity 4.7% 2.3%
Q4 Unit Labour Costs â€“1.0% 2.0%
Initial Jobless Claims 283k 304k
Jpn Jan Base Money %yr 1.0% n/f
Eur Dec Producer Price Index 4.2% 4.1%
ECB Repo Rate Decision 2.25% 2.25%
UK Jan PMI Construction 52.6 55.5
Latest Research papers/Publication
â€¢ NZ Economic Overview January 2006 (1 February)
â€¢ NZ Labour Market Preview (1 February)
â€¢ NZ Terms of Trade:History & Significance (26 January)
â€¢ NZ RBNZ OCR Review (26 January)
â€¢ NZ Weekly Forex Outlook (23 January)
â€¢ NZ Q4 CPI Review/OCR Preview (18 January)
â€¢ NZ Q4 QSBO Review (17 January)
â€¢ NZ Weekly Forex Outlook (16 January)
These papers/publications are available on Online Research on
Westpac Institutional Bankâ€™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. Â© 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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