Thursday February 16, 2006 - 01:19:39 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar NZD trades quietly ahead of Bernanke
The NZD held above seven-week lows yesterday, lacking clear direction ahead of the much-awaited testimony by the new Federal Reserve chairman Ben Bernanke. The consolidation comes as sluggish NZ data is reinforcing the deteriorating economic outlook and keeping the NZD under pressure. Support is being provided as speculation about more Eurobond and Uridashi issuances is circulating. The currency did manage to spike to a high of 0.6800 overnight but has pushed lower to open this morning around 0.6740.
Australian Dollar: AUD also looks for direction
The annualised growth rate of the Westpac-Melbourne Institute leading index, which indicates the likely pace of economic activity, rose 4.1% in December, above its long-term trend of 3.7%. However this number failed to push the AUD out of its recent range. The AUD saw lackluster trading yesterday as traders look to Fed Chairman Bernankeâ€™s first testimony. The testimony will be closely monitored to see if he is as committed to fighting inflation as his predecessor, Alan Greenspan, was and to provide some near term direction to the market. The AUD opens around 0.7380 today.
Major Currencies: USD rally runs out of steam
The USD moved a little higher on Wednesday boosted by Fed chairman Bernanke signalling further US interest rate increases in his speech before the US house financial services committee. The USD was initially lower after US net capital inflows for Dec were lower than expected at $65.7bn, which was not sufficient to cover the months trade deficit. But the dollar recovered after Bernankeâ€™s comments, which were seen as USD positive. The euro traded a 1.1955 high and opens this morning at around 1.1880.
US Fed chair Ben Bernanke delivered refreshingly clear-cut testimony that emphasised short-term inflation risks, especially from the labour market, and the likely need for further policy tightening, subject to the data. At the same time, risks associated with a housing sector downturn in the longer term were flagged (though not given policy significance, yet).
US industrial production falls 0.2% in Jan,
but the fall reflected the slump in utility output due to low energy usage during last monthâ€™s unseasonably mild weather. Manufacturing was actually quite strong, up 0.7%, led by the first monthly gain in auto output since Sep last year. Elsewhere manufacturing rose 0.5%, with strength in some sectors, weakness in others.
The NY Fed index rose slightly to 20.3 in Feb,
even though there were slight declines in the key orders and shipments indices, and a steeper fall in jobs. Thatâ€™s a reversal of the previous month, when the headline was much softer than the detail. Abstracting from those swings, it is clear the NY district manufacturing is in solid shape. The prices measure captured the renewed upswing in energy prices in late January, though of course that has since abated.
US TIC data revealed an inflow of just $56.6bn in Dec,
the lowest result since May last year, mainly due to reduced demand for US Treasuries.
The Bank of England published its quarterly inflation report.
The central projection for inflation shows the CPI running very close to 2% right out to 2009. This is not the dovish assessment that some commentators were looking for, and makes a rate cut in the short-term (i.e. before the next inflation report in May) less likely. On the data front, unemployment fell 2k in Jan, the first decline for a year.
Country Release Last Forecast
NZ Q4 PPI (Outputs) 1.8% 0.2%
Aust Jan Merchandise Imports AUDbn 13.6 n/f
Feb RBA Monthly Bulletin
US Jan Import Prices -0.2% 0.9%
Jan Housing Starts -8.9% 6.0%
Jan Building Permits -4.4% 2.0%
Initial Jobless Claims w/e 11/2 277k 280k
Feb Philadelphia Fed Index 3.3 7.0
UK Jan RICS House Price Balance 8% 12%
Jan Retail Sales Volumes 0.4% 0.2%
Can Dec Manufacturing Shipments -1.5% 1.0%
Latest Research papers/Publication
â€¢ NZ Q4 Retail Sales (14 February)
â€¢ NZ Weekly Forex Outlook (13 February)
â€¢ NZ Economic Overview January 2006 (1 February)
â€¢ NZ Labour Market Preview (1 February)
â€¢ NZ Weekly Forex Outlook (30 January)
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)
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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