Monday June 5, 2006 - 21:54:05 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar NZD recovers after initial move lower
The NZD remained below 0.6300 most of Friday after being dragged down by a weak AUD and a USD boosted by speculation over future interest rate rises. The sell-off in gold and a wave of profit taking in metals weakened the AUD as the market looks for offshore influence this week ahead of the RBNZâ€™s MPS on Thursday. Some direction came from a weak US non-farm payrolls number and a raft of other US data, which saw the NZD to a high of 0.6360. After yesterdays Queenâ€™s Birthday holiday we continue to consolidate and open the week just above 0.6300.
Australian Dollar: AUD hit by data deluges
The AUD sold-off on Friday, but paused yesterday, consolidating around 0.7525 after USD weakness. Soft US payrolls derailed the USDâ€™s recovery prompting investors to pare back expectations of a June rate rise. The currency shrugged off an initial wave of mainly secondary local data yesterday, however the market eagerly awaits the Australian current account, GDP, employment data and the RBA rate announcement on Wednesday. The AUD opens the day around 0.7480.
Major Currencies: Bernanke rhetoric catalyst for USD rally
Federal Reserve Chairman Ben Bernankeâ€™s speech at an International Monetary Conference on Monday indicated the Fed will remain vigilant on inflation pressures and said current inflation levels were at the top end of the comfort zone. The FX market has increasingly speculated about whether the Fed will hike interest rates for the 17th consecutive time at their next meeting in June and has been sensitive to such comments. Any hints of a rate rise give immediate support to the US dollar and speculation of a pause in the tightening cycle hurt the dollar. After rallying early in the day the euro weakened after Bernankeâ€™s remarks, coming off the high at 1.2980 and opening today at 1.2905. The Sterling traded sideways for much of Monday between 1.8825 and 1.8860 but weakened during the US session and closed around 1.8725. Japanese yen price action was similar to the Sterling and traded quietly between 111.45 and 111.80 for most of the day but dollar strength took the pair to 112.15 this morning.
MoF survey points to major upward revision to Japanese Q1 GDP.
A literal application of the MoF's comprehensive survey of incorporated business activity to the second estimate of GDP gives a very rapid growth out-turn for the second consecutive quarter. With appropriate discounting, we feel that GDP will be revised up to the 4Â½% to 5% annualised range. The preliminary release for Q1 was 1.9%.
US ISM non-manufacturing as expected.
The May survey headline was steady at 60.1, reversing April's rise. The activity components were mixed: new orders down noticeably, order backlogs down, but employment and export orders up. The more noteworthy result was the 7-point jump in prices paid to 77.5, the highest level since Hurricane Katrina impacted - and something to add to the Fed's disquiet over recent inflation indicators.
UK services PMI edges down.
The May PMI declined to 59.2 from 59.7, remaining near its 2+ year high. The activity components shifted only modestly and prices that the service industries charge showed no added pick-up.
Country Release Last Forecast
NZ Q1 Wholesale Trade Survey â€“1.6% â€“
Aust Q2 Westpac-ACCI Survey 51.1 â€“
Apr Housing Finance (No.) 0.7% 0.5%
Q1 Public Spending 2.6% 1.2%
Q1 Current Account Deficit AUDbn 14.4 15.6
Q1 Net Exports Contribution ppts â€“0.5 â€“0.4
US Fedspeak: Gov Bies and Kansas City Fed Pres. Hoenig
Eur May PMI Retail 54.6 50.0
UK May Consumer Confidence 93 n/f
May BRC Retail Sales Monitor
Can Apr Building Permits 5.3% â€“3.0%
May IVEY PMI 55.7 58.0
Latest Research papers/Publication
â€¢ NZ June RBNZ MPS Preview (2 June)
â€¢ NZ Weekly Forex Outlook (29 May)
â€¢ A changed reaction function? (23 May)
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)
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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