Thursday April 27, 2006 - 21:32:48 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar A weaker USD continues to underpin NZD
As expected the RBNZ left the OCR unchanged at 7.25% yesterday once again ruling out a cut in rates this year. The statement acknowledged that the economy had cooled but noted that short-term inflation pressures had intensified. Initial reaction saw the NZD rally to 0.6345, before selling off sharply to 0.6285 as Statistics NZ revised down Q1 inflation from 0.7% to 0.6%. While higher dairy exports saw the release of a trade surplus in March, little reaction was noted and the currency ended the domestic session hugging 0.6300. A weaker USD overnight, following comments from Fed Chairman Ben Bernanke suggesting the US trade deficit may undermine the USD, saw the NZD dragged firmer to an overnight high of 0.6349.
Australian Dollar: AUD firmer as interest rate speculation mounts
Having broken higher through 0.7500 during Wednesdayâ€™s overnight session, the AUD traded within a 0.7520 - 0.7539 range during local trading yesterday. Market focus remains on next weekâ€™s RBA meeting, with speculation mounting as to whether they will raise interest rates. A weaker USD overnight saw the AUD firm to highs of 0.7581, before settling back to 0.7565 from where the market opens this morning.
Major Currencies: Bernanke deals another blow to the USD
The USD tumbled to a seven month low against the euro on Thursday after Fed Reserve Chairman Ben Bernanke gave the clearest signal yet that the US central bank may pause in its rate raising campaign in his testimony to congress. As a result the euro easily broke through the psychological resistance level of 1.2500 to post a session high of 1.2549 before paring its gains to open this morning around 1.2535. The yen also posted gains earlier in the session after China raised interest rates for the first time since Oct 2004 with the USD slipping to 113.83 a level last seen in mid January. It opens this morning around 114.10.
Bernanke more dovish than expected.
The key Bloomberg headline was "Bernanke says Fed may pause even if risks aren't balanced". In reality the text was dovish but not to the degree suggested by the headline. The Fed Chairman indicated that "even if in the Committee's judgment the risks to its objectives are not entirely balanced, at some point in the future the Committee may decide to take no action at one or more meetings in the interest of allowing more time to receive information relevant to the outlook. Of course, a decision to take no action at a particular meeting does not preclude actions at subsequent meetings, and the Committee will not hesitate to act when it determines that doing so is needed to foster the achievement of the Federal Reserve's mandated objectives" i.e. pause does not mean stop. Future hikes beyond 5% remain data dependent: "Future policy actions will be increasingly dependent on the evolution of the economic outlook, as reflected in the incoming data". However, for FX markets the introduction of current account talk is a little concerning: "While it is likely that current account imbalances will be resolved gradually over time, there is a small risk of a sudden shift in sentiment that could lead to disruptive changes in the value of the dollar and in other asset prices".
US jobless claims a little weaker.
The weekly number rose to 315k from 304k, versus mkt f/c of 305k.
German employment report steady.
Unemployment held at 11.3% and the number of unemployed fell by 40k.
Country Release Last Forecast
NZ Mar Building Consents 12.4% â€“5.0%
Aust Mar Credit 1.4% 1.2%
US Q1 GDP 1.7% 5.1%
Q1 Employment Cost Index 0.8% 0.9%
Apr UoM Consumer Sent. (F) 89.2a 89.2
Apr Chicago PMI 60.4 58.0
Jpn Mar Unemployment Rate 4.1% 4.2%
Mar National Core CPI %yr 0.5% 0.5%
Mar Industrial Production â€“1.2% 0.3%
Bank of Japan Meeting
Eur M3 Money Supply %yr 8.0% n/f
Apr Business Climate Indicator 0.80 n/f
Apr Economic Confidence 103.5 n/f
Latest Research papers/Publication
â€¢ NZ RBNZ OCR Review (27 April)
â€¢ NZ Weekly Forex Outlook (24 April)
â€¢ NZ Interest Rate Strategy Weekly (24 April)
â€¢ NZ Q1 CPI Review/OCR Preview (19 April)
â€¢ NZ Interest Rate Strategy Weekly (19 April)
â€¢ NZ Weekly Forex Outlook (18 April)
â€¢ Diving kiwi, soaring petrel (13 April)
â€¢ NZ Economic Overview April 2006 (13 April)
â€¢ NZ Q1 QSBO Review (11 April)
â€¢ NZ Q1 CPI Preview (11 April)
â€¢ NZ Weekly Forex Outlook (10 April)
â€¢ NZ Interest Rate Strategy Weekly (10 April)
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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