Monday May 22, 2006 - 21:54:20 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar NZD/AUD at 4 week high as metal prices dominate
While pressure on the AUD spilled over into the NZD following Fridayâ€™s sharp sell-off in precious and industrial metals, the NZD was confined to a 0.6170 â€“ 0.6201 range during local trade yesterday. In early overnight trade, the currency dipped to a low of 0.6145, before USD selling and a rebound on the commodity exchanges saw the NZD once again recapture 0.6200. While this rebound sees the NZD open at familiar levels of 0.6220 this morning, pressure on the AUD has allowed the NZD to strengthen to a 4 week high of 0.8260 on the cross.
Australian Dollar: AUD off lows as metals stage recovery
The AUD remained under pressure yesterday following Fridayâ€™s 5% fall in industrial metals and a sharp pullback in bullion prices. This prompted a move towards currencies being perceived as risk averse. Despite a volatile overnight session on the London Metal Exchange, base metals staged a recovery over the day. This, coupled with a resumption of USD selling, following the reiteration of the ECBâ€™s â€śvigilantâ€ť stance, has seen the AUD recover to 0.7530 from where the currency opens this morning.
Major Currencies: Market forces create volatile price action for USD
Central bank monetary policy, jawboning and the commodity markets have combined to create currency volatility over the past weeks and Monday was a prime example. The currency markets are looking towards the Fed, the European Central Bank and the Bank of Japan who all have policy meetings in June. The ECB is likely to hike rates, supporting the euro; the BoJ is rumoured to tighten its super loose monetary policy, boding well for the yen; and the markets are still unsure about the Fed, not particularly encouraging for the dollar. Rhetoric from the Greek and Dutch finance ministers indicated they were not worried about the rising euro, boosting it further. The USD has gained some support from the volatile commodity markets; and has strengthened against commodity currencies such as the NZD and AUD. The euro ended Monday at 1.2886 after trading down to 1.2692 earlier in the day. Sterling also finished strongly after dipping early on, GBP/USD closing 1.4% higher at 1.8888. The yen remained relatively unchanged on the day, opening and closing near 111.40 after weakening to 112.95 during NZ trade.
Non-voting Dallas Fed President Fisher said that inflation was running too high for comfort, pointing to the trimmed-mean private consumption expenditure deflatorâ€™s 2.3% y/y growth compared to the core PCE growth of 2%. And despite his expectation that growth would moderate in H2, due in part to a slowing housing market, he reserved judgment about whether the data before the next FOMC meeting would benign.
The March Eurozone trade balance
was a seasonally adjusted â‚¬0.3bn â€“ its first surplus after three consecutive deficits. A combination of stronger exports and softer imports swung the balance back into the black. Net exports for Q1 are looking to be a drag on overall growth, with energy imports boosting imports.
Date Country Release Last Forecast
23 May US May Richmond Fed Index 18 15
Fed Chair Bernanke testimony
Eur Mar Industrial Orders 2.7% n/f
Ger Q1 GDP (F) 0.4%a 0.4%
Apr Retail Sales â€“1.2% n/f
24 May Aust Mar Westpac-MI Leading Index 3.5% n/f
US Apr Durable Goods Orders 6.5% 1.0%
Apr New Home Sales 13.8% â€“10.0%
Latest Research papers/Publication
â€˘ NZ Weekly Forex Outlook (22 May)
â€˘ NZ Budget 2006 Review (18 May)
â€˘ NZ Q1 Retail Sales Review (15 May)
â€˘ NZ Weekly Forex Outlook (15 May)
â€˘ NZ Interest Rate Strategy Weekly (15 May)
â€˘ NZ Q1 HLFS Review (11 May)
â€˘ NZ Interest Rate Strategy Weekly (9 May)
â€˘ NZ Q1 LCI and QES Review (8 May)
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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