Thursday April 6, 2006 - 00:13:03 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar NZD stabilises, assisted by weaker USD
The NZD strengthened yesterday, supported by a weaker USD, however traders still see the currency in a downtrend. The steady move higher came about despite NZ employment confidence falling in Q1, for its fifth consecutive decline. The NZD benefited from the USD shifting lower against the euro on expectations that the ECB will raise rates next month while the Fed was nearing the end of its tightening cycle. The NZD move peaked at 0.6158 overnight and we open today around this level.
Australian Dollar: AUD surges as market foresees hike
The AUD pushed higher yesterday on speculation of an imminent rise in Australian interest rates after a spate of strong economic data. Australiaâ€™s yield premium over the US has been shrinking for so long that it appears the mere possibility of an RBA hike some time in coming months has shaken AUD bears. The AUD reached a high of 0.7292 overnight. As expected, the RBA left rates unchanged yesterday, but recent data has proved stronger than expected which makes todayâ€™s employment data even more crucial than usual. We open todayâ€™s trading around 0.7275
Major Currencies: US ISM non-manufacturing resilient. The March headline rose Euro eyes 1.2300
Zea All the focus was on the euro overnight as it climbed to a 2 month high of 1.2306 against the USD just short of key resistance at 1.2325, spurred on by the prospect of higher interest rates. The ECB is likely to leave interest rates on hold at 2.5% on Thursday, but bank chief Trichet should signal a rise in May according to economists. The USD fared better against the yen climbing steadily from 116.68 to a session high of 117.78 as the JPY was sold across the board. A remark by the US Treasury Secretary Snow that Fridayâ€™s employment report for March will contain â€śgood numbersâ€ť also helped the USD. to 60.5 from 60.1and new orders rose solidly to unwind some of the softness that set in earlier in the year. The employment component did ease off, which was to be expected after the considerable jump it made in the preceding month. For the second month in a row the prices paid component has declined, and is at its lowest level in 26 months suggests little imminent inflation risk.
US Mortgage applications pick up.
Applications rose 7.2% in the week ending March 31, a loose signal that the pullback in housing after the recent warm weather surge has come to an end.
Euroland services PMI steady in March.
The index remained at 58.2, indicating a decent rate of expansion. The composite manufacturing and services PMI continued its clear uptrend to hit 58.5, highlighting that European businesses are increasingly confident about the operating environment.
Euroland retail sales weak in Feb.
Sales fell 0.2%, Janâ€™s were revised back 0.3ppts to 0.5%, and 0.2ppts were chopped off Decâ€™s. Consumption spending held back Q4 GDP growth, and the turnaround in Q1 is looking modest. Consumers are yet to join the touted recovery.
UK industrial production shrank in Feb.
Production fell 0.2%, making the late 2005 pick-up in industrial production appear shortlived. Declines occurred across all the main industrial groups, but notable is that manufacturing gave up the ghost after 3 months of expansion.
UK services PMI also fell back in Mar.
The PMI fell to 57.4 from 58.9, the main weakness being in the new business and business expectations components. But it remains at a solid expansionary level, in contrast with the industrial sector.
UK BRC shop price index still falling.
The retail consortium reported that high street prices were down 0.35% m/m and down 1.2% y/y. Anecdotes pointed to continued discounting to entice shoppers.
Country Release Last Forecast
Aust Mar Employment/Unemploy Rate 25.9k/5.2% 15k/5.3%
US Initial Jobless Claims w/e 25/3 302k 298k
Eur ECB Rate Announcement 2.50% 2.50%
UK BoE Rate Announcement 4.50% 4.50%
Ger Feb Factory Orders 1.4% 0.5%
Can Feb Building Permits â€“19.3% 0.0%
Mar Ivey PMI 59.5 60.0
Latest Research papers/Publication
â€˘ NZ Q1 Employment Confidence Index (5 April)
â€˘ Exchange rate impact on inflation (3 April)
â€˘ NZ Weekly Forex Outlook (3 April)
â€˘ NZ Interest Rate Strategy Weekly (3 April)
â€˘ A dry wake (31 March)
â€˘ NZ Q1 Consumer Confidence (29 March)
â€˘ NZ Weekly Forex Outlook (27 March)
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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