Tuesday June 6, 2006 - 21:36:40 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar NZD slips on firmer USD Govt Stock
The NZD eased back yesterday, weighed down by a stronger USD as the market awaits tomorrowâ€™s RBNZ rate announcement. The RBNZ are expected to keep the OCR at 7.25% and reiterate their intention to keep them there for the rest of the year. The USD extended gains after Fed chairman Bernankeâ€™s comments on Monday were echoed by St Louis Fed President Poole reiterating that they would remain vigilant to contain a pick-up in core inflation. The comments increased expectations the Fed will raise rates later this month. The NZD was sold down to 0.6261 overnight and we open the day just above that level.
Australian Dollar: AUD largely ignores data, but not Fed
The AUD fell from its intraday high of 0.7485 yesterday as the USD surged after hawkish Fedspeak on inflation. The comments outweighed the effect of an unexpected narrowing of the current account deficit. In contrast, the RBA is expected to keep rates on hold at 5.75% today. Other soft domestic data yesterday also weighed heavily on the AUD and we open this morning just above 0.7400.
Major Currencies: Inflation concerns cause hawkish Fed, dollar rally
The market again focused on the inflation theme on Tuesday as St Louis Fed president Poole voiced his concerns about inflation expectations. Poole was quoted in the Wall St Journal saying he would prefer to â€śerr on the side of going a little too farâ€ť in terms of monetary policy tightening. Pooleâ€™s comments imply interest rates could push higher over the near term and helped the US dollar to rally for the second successive day. The USD was stronger against all the major currencies at the close of trading on Tuesday. The dollar was around 1% stronger against the Japanese yen, Sterling and euro yesterday but gave up some of its gains late in the day. The USD opens today at 113.30, 1.8605 and 1.2830 against the yen, GBP and euro respectively.
: But St Louis Fed president Bill Poole was quoted in the Wall St Journal as saying that he would prefer â€śto err on the side of going a little too farâ€ť, given that inflation expectations are higher than he would like. He was not convinced that slowing growth would pull inflation back into line, if indeed it does turn out higher than currently expected. And early yesterday Fed Chairman Bernanke said rising inflation measures are â€śunwelcomeâ€ť and the Fed would make sure they are not sustained.
Two very different Canadian reports.
The Ivey PMI surged from 56 to 75 in May, an all-time high. The index is not seasonally adjusted, and tends to rise in May, but that is still a very strong result, suggesting manufacturing is coping with the strong C$. However building permits slumped 10.6% in April, showing broad-based weakness.
Euroland services PMI rose from 58.3 to 58.7 in May,
its highest since Q3, 2000.
Date Country Release Last Forecast
7 Jun Aust RBA Announcement Window 5.75% 5.75%
May Cashcard Retail Index 0.5% n/f
Q1 GDP 0.5% 0.6%
US Apr Consumer Credit USDbn 2.5 2.5
Eur Apr Retail Sales â€“0.8% 2.0%
Ger Apr Factory Orders â€“ â€“
UK May BRC Shop Price Index
8 Jun NZ RBNZ MPS 7.25% 7.25%
Aust May Employment chg â€“3.2k 20k
May Unemployment Rate 5.1% 5.1%
Latest Research papers/Publication
â€˘ NZ Weekly Forex Outlook (6 June)
â€˘ NZ Interest Rate Strategy Weekly (6 June)
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)
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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