Tuesday March 7, 2006 - 20:36:04 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar NZD continues lower
The NZD was crushed to 18-month lows yesterday on expectations that the local currency would soon lose its attractive yield advantage. Opening around 0.6570, the currency quickly fell to around 0.6520 as sellers emerged from all corners. It was largely downhill in the offshore session as well as the NZD succumbed along with other major currencies against the USD. The NZD is on its lows this morning as we open around 0.6480.
Australian Dollar: AUD through lower end of range
The AUD slid to new recent lows yesterday for largely the same reasons as NZD; a declining yield advantage making the currency unattractive. Opening the day around 0.7400 the AUD didnâ€™t go much higher, with a steady decline being the order of the day. At the local close AUD was around 0.7380 and continued to slip overnight, eventually bottoming out around 0.7330 where we open this morning. AUD has now breached the lower end of its recent 0.7350- 0.7450 range.
Major Currencies: Fed comments inspire USD rally
The USD rallied across the board yesterday after Federal Reserve member Poole said in an interview that the Fed may have to raise interest rates further if economic growth was consistently strong. The rally continued overnight and the euro and GBP open at the lows this morning, 1.1880 and 1.7360 respectively. The JPY also softened against the USD overnight, and opens at 117.96 this morning. The Bank of Canada hiked rates to 3.75% overnight, as expected, but the dovish tone of the statement surprised the market and USD/CAD rallied to 1.1947.
US Q4 productivity was revised up little
from the original â€“0.6% print, still registering a quarterly decline relative to the near- flat consensus. Output was revised up 0.6ppts, taking on board the upgraded GDP result. However, hours worked were also bumped up â€“ so the added output was achieved through added inputs rather than an implied productivity improvement. Compensation per hour remained as with the original print, but without the forecast boost to productivity the result was that unit labour costs didnâ€™t get revised down quite as much as expected. The revisions donâ€™t materially change the picture of weak productivity in Q4 and a recent uptrend in labour costs.
Fed President Poole (a non-voting FOMC member) said the US economy has a great deal of momentum and â€śwe may have to step a little harder on the brakeâ€ť.
The Bank of Canada raised rates a further 25bps to 3.75%.
However, the BoC has moderated its stance to leave the prospects of a further rate hike more open-ended. Januaryâ€™s policy assessment was shifted to â€śsome modest further increase in the policy interest rate may be requiredâ€ť from â€śwould be requiredâ€ť. Still a tightening bias, but, it seems, becoming more data dependent in the wake of a stronger than anticipated C$.
German factory orders bounced sharply in January
after Decemberâ€™s dip, but that monthâ€™s fall was revised up by a significant 1.3 ppts. So further confirmation here that German industrial sector recovery is well underway. However the breakdown continues to show orders strength dominated by the foreign sector.
UK British Retail Consortiumâ€™s retail sales
monitor for February had annual growth holding roughly steady at 3.5% y/y, while same-store sales picked up to 0.6% from 0.2%. This surveyâ€™s result was stronger than that of the CBI survey released on Feb 28, which fell from â€“11 to â€“18. The true retail sales picture for February is likely to be somewhere in between.
Country Release Last Forecast
7 Mar Aust RBA Policy Announcement 5.5% 5.5%
Jpn Feb Bank Lending %yr flat 0.2%
Feb M2+CD Money Supply %yr 1.9% 2.0%
UK Feb BRC Retail Price Index
Can Feb Housing Starts 248k 235k
9 Mar NZ RBNZ MPS 7.25% 7.25%
Q4 Terms of Trade â€“0.5% â€“0.3%
Latest Research papers/Publication
â€˘ A dysfunctional tool? (7 March)
â€˘ NZ Weekly Forex Outlook (6 March)
â€˘ NZ RBNZ March MPS Preview (2 March)
â€˘ NZ Weekly Forex Outlook (27 February)
â€˘ NZ Weekly Forex Outlook (20 February)
â€˘ An over-inflated problem (16 February)
â€˘ NZ Q4 Retail Sales (14 February)
â€˘ NZ Weekly Forex Outlook (13 February)
These papers/publications are available on Online Research on
Westpac Institutional Bankâ€™s website (www.wib.westpac.co.nz)
Upcoming Events Latest Research Papers/Publications
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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