Thursday June 8, 2006 - 00:15:39 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar NZD steady ahead of RBNZ
The NZD traded a tight 30 point range yesterday as traders look to this morning‚Äôs release of the RBNZ‚Äôs MPS to gauge the likely timing of interest rate cuts. The RBNZ are widely expected to hold rates at 7.25% and reiterate that they will remain on hold for the rest of the year. The strong focus on the inflation spike means little chance of the RBNZ relaxing its stance. The currency did come down from the 0.6300 mark to a low of 0.6225 overnight as yet another Fed official echoed Fed chairman Bernanke‚Äôs comments which suggested a rate rise to contain core inflation may be imminent. We eagerly open trading this morning around 0.6250.
Australian Dollar: AUD lifts on strong GDP figure
The AUD came off a seven-week low to peak at 0.7432 yesterday after robust growth figures reinforced expectations of another rate rise this year. The move was capped by USD strength and unstable commodity prices, particularly the uncertainty regarding gold and metal prices. The RBA holding fire on rates, which was broadly anticipated this time around, also contained the move higher. The GDP data showed annual growth had increased by 3.1%, as the market now awaits the ECB rate decision and today‚Äôs Aust employment figures to gain further direction. The market opens today around 0.7400
Major Currencies: USD rally tempered by potential ECB rate hike
The USD had its third consecutive ‚Äėup‚Äô day on Wednesday, a byproduct of the hawkish Fedspeak that has been prevalent this week. Atlanta Fed President Guynn supported his Federal Reserve colleague Poole and Chairman Bernanke by saying the Fed won‚Äôt let its guard down when dealing with inflation pressures. The rhetoric coming from the US central bank has all but convinced the market that they will hike rates again this month. There is now an 84% chance of a hike on June 30. The rebounding USD was countered somewhat by the ECB who are expected to lift their interest rates today from 2.50% to 2.75%. The euro drifted lower from intraday resistance level at 1.2940 to a new low for the week at 1.2760 and opens today at 1.2795. Sterling traded a 1.8647 high but weakened offshore and moved down to 1.8527 late NY time. The USD rallied against the yen for much of yesterday, strengthening from 112.92 to 113.69, closing a shade lower at 113.50.
Atlanta Fed president Guynn, an FOMC voter this year ‚Äď saying that core inflation may be beyond the Fed‚Äôs comfort level and that FOMC members ‚Äúmust be open to rethinking‚ÄĚ the level of rates. The case for a further rate rise on June 29 is getting stronger!
Euroland retailing looking stronger.
There were two reports: a 1.4% jump in April retail sales, perhaps boosted by Easter a little; and a 56.3 reading on the Euroland retail PMI for May ‚Äď the highest ever (in the two year history of this series!). Both reports suggest that the European consumer is participating in the economic recovery at last, and that the rise in household spending revealed in the Q1 GDP report might be sustainable.
German manufacturing orders were reported as up 4.9%
on year ago levels in April, down from 15.0% yr in March. No monthly figure was available, and data collection problems meant the report was incomplete.
Country Release Last Forecast
Aust May Employ/Unemploy Rate -3.2k/5.1% 20k/5.1%
US Initial Jobless Claims w/e 3/6 336k 332k
Apr Wholesale Inventories 0.2% 0.6%
Jpn May M2+CD Money Supply %yr 1.7% 1.7%
May Bank Lending %yr 1.2% 1.6%
Eur ECB Repo Rate Decision 2.50% 2.75%
UK Apr Industrial Production 0.7% 0.5%
BoE Repo Rate Decision 4.50% 4.50%
Can May Housing Starts -13.3% 2.0%
Apr New House Prices 1.0% 0.7%
Latest Research papers/Publication
‚ÄĘ NZ Weekly Forex Outlook (6 June)
‚ÄĘ NZ Interest Rate Strategy Weekly (6 June)
‚ÄĘ NZ June RBNZ MPS Preview (2 June)
‚ÄĘ NZ Weekly Forex Outlook (29 May)
‚ÄĘ A changed reaction function? (23 May)
‚ÄĘ NZ Weekly Forex Outlook (22 May)
‚ÄĘ NZ Budget 2006 Review (18 May)
‚ÄĘ NZ Q1 Retail Sales Review (15 May)
‚ÄĘ NZ Weekly Forex Outlook (15 May)
‚ÄĘ NZ Interest Rate Strategy Weekly (15 May)
These papers/publications are available on Online Research on
Westpac Institutional Bank‚Äôs 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. ¬© 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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