Sunday April 30, 2006 - 23:51:35 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning Report
Westpac Institutional Bank Morning Report
New Zealand Dollar NZD shifts higher after Fed comments
The NZD squeezed to a one-month high of 0.6343 on Friday, supported by a broadly weaker USD after the US Federal Reserve chairman Bernankeâ€™s comments gave the clearest signal yet of a pause in the rate tightening campaign. Congress was told that the US economy was poised to slow and the Fed policy panel may stop tightening rates soon. Despite dwelling consents falling sharply in March, the NZD continued higher overnight to peak at 0.6388 and we open around 0.6370. detracted from growth as expected. The overall GDP deflator was on the strong side. However, the consumer front was less threatening, with the core PCE deflator up 2% annualised and moderating from Q4â€™s 2.4%. Both the rebound in growth and the PCE deflator are in line with Fed expectations. The focus goes back now to recent signs that growth momentum could continue into Q2, which would go against the grain of Fed expectations.
Australian Dollar: Rate rise risk buoys AUD
The AUD found yield-related support on the risk of an interest rate rise by June. The AUD rallied on last weeks evidence that domestic inflation had accelerated and that an interest rate rise was imminent. Last weeks steeper than expected rise in Q1 inflation highlighted the risk of a breach of the top of the central banks 2-3% inflation target. Broad USD weakness assisted the currency to reach its high of 0.7606\ overnight. We start the week around the 0.7590 mark and with focus on Wednesdayâ€™s announcement by the RBA.
Major Currencies: US interest rate hikes in doubt
The USD suffered more losses against its major trading partners on Friday as increasing doubts over rate hikes took its toll. Rhetoric from Federal Reserve chairman Ben Bernanke indicated the central bank could end its interest rate tightening after 15 consecutive rises since June 2004. Mixed data failed to help the USD as the euro rallied to an 11-month high at 1.2640, and the Sterling strengthened by 1.4% to an eight-month high at 1.8260. The yen strengthened to take the USD/JPY to a four-month low at 113.66.
US GDP grew at a 4.8% annualised rate,
only a shade under the
4.9% consensus, driven by a 5.5% rebound in consumer spending.
Business and government (defence, specifically) expenditure also
accelerated. Slower inventory growth after Q4â€™s surge and net exports
US Chicago PMI for April
was just shy of expectations, with mixed
details. Production edged up to its highest level since the post-Katrina
bounce and orders softened. Employment weakened noticeably and
prices paid shot up in response to recent oil price rises.
The final University of Michigan consumer sentiment
result was pulled back nearly 2.0 points to 87.4.
US Q1 Employment Cost Index was
very mild at 0.6% q/q. In recent quarters benefit growth has been pared back, implying firms are working at containing costs.
The flash estimate for April Euroland inflation rose
0.2ppts to 2.4%, against 2.3% expected. Oil prices will be the main culprit upon publication of the breakdown.
European business sentiment made concerted gains in April
in the European Commission and the separate business climate index, though consumer sentiment is lagging.
Euroland M3 money supply growth
accelerated for the fourth month in a row, which will add to the ECBâ€™s stated concerns over excess liquidity.
German retail sales
disappointed for a second month in a row, with ex-auto and petrol sales volumes down 2.7%. The late (April) Easter likely threw the seasonal adjustment out, and poor weather may also have constrained spending.
UK consumer confidence reversed back up to â€“4,
a little more upbeat than expected and another reason for the BoE to shy away from rate cuts in the near term.
Canadian February GDP rose 0.2%,
in line with expectations.
Country Release Last Forecast
Aust Apr AIGâ€™s PMI 53.2 n/f
Apr TD-MI Inflation Gauge 0.3% n/f
US Apr ISM Manufacturing 55.1 55.5
Mar Personal Income/Spending 0.3%/0.1% 0.4%/0.5%
Mar Core PCE Deflator 0.1% 0.2%
Mar Construction Spending 0.8% 0.5%
Jpn Mar Ordinary Earnings %yr 0.4% n/f
UK Labor Day Holiday
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)
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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