Tuesday June 13, 2006 - 21:55:49 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar
Disappointing retail sales weighs on NZD
The NZD opened on it highs for the day slightly above the 0.6300 handle but any sign of further consolidation was quickly snuffed out after a weaker than expected April retail trade number saw the currency plummet to around 0.6250 where it sat for the rest of the day. The negative sentiment was carried through to the offshore session with the NZD falling briefly below 0.6200 to post a 3 week low of 0.6192. It opens this morning around 0.6210.
Australian Dollar: AUD dragged lower by weaker gold
The AUD followed a similar path to the NZD opening on its highs then steadily tracking lower as gold probed beneath $600 an ounce. Flows were clearly weighted to the sell side and this theme spilled over into the offshore session with the AUD hitting a low of 0.7368 â€“ a level last seen in late April. Falling commodities, rising risk aversion and global growth worries are seen as the main contributors towards the AUD decline and consequently it struggled to get back over 0.7400 for the rest of the session.
Major Currencies: Inflation data pushes USD to seven-week highs
USD strength continued on Tuesday boosted by a strong core PPI reading that has added weight to recent hawkish Fedspeak and market views that the Federal Reserve will hike interest rates late June. The core PPI data came out at 0.3% while markets were expecting a 0.2% rise, this will worry Fed members as they have already made clear their concerns about ongoing inflation pressures. The euro sold off from 1.2616 before the data release and traded a seven-week low at 1.2530 late NY time. Sterling also gave way to the rampaging USD, selling off from 1.8460 down to 1.8326 this morning. The USD rallied to a seven-week high against the Japanese yen, moving from 114.25 to 115.44; the pair tests the highs as we go to print.
Jpn Apr industrial production revised to 1.4%
from prelim 1.5%. This was made all the more interesting by capacity utilization rebounding in the month with production set to surpass the Dec 2005 high, and matching the cyclical high of 1997, the highest in 14 years.
US PPI core up 0.3% in May.
A fall in food prices and lower gas prices, offsetting higher gasoline prices, held the PPI headline to a 0.2% gain in May. But the core PPI lifted 0.3%, driven by a rise of that magnitude in capital equipment prices, and a 1.9% jump in pharmaceuticals. Also, womenâ€™s apparel was up 0.5%. These latter two categories (drugs and clothes) pose some upside risk to the core CPI, which will be published tonight.
US retail sales up 0.1% in May.
Retail sales growth was subdued in May, due to a fall in autos, but sales ex autos and gasoline were a little stronger than in April, which was revised lower. Even so, the trend in sales is clearly softer: the three month annualised pace of sales ex autos/gas was 6.2%, barely half of Marchâ€™s 12.2% pace.
US business inventories were constrained to a 0.4% rise in April
by a fall in auto dealersâ€™ stocks; factory and wholesale stocks were up robustly. This result means a slightly softer start to the quarter for inventory building, but itâ€™s too early at this stage to make downward adjustments to Q2 GDP forecasts.
The German ZEW survey fell from 50.0 to 37.8 in June.
It seems that ECB rate rises, surging oil prices, diminished enthusiasm for the new Merkel government, concern that recent stronger consumer spending will fade when the VAT rate goes up next year and the stronger euro were factors.
The UK CPI rose to 2.2% yr in May,
back above the BoEâ€™s 2% target for the first time this year. The rise was driven by petrol prices and utility bills (especially gas), food and clothing. But core inflation slowed from 1.3% yr to 1.1%yr.
Country Release Last Forecast
Aust Jun Westpac-MI Consumer Sentiment â€“6% n/f
Q1 Enterprise Bargaining: new %ann 4.5% n/f
US May CPI/Core 0.6%/0.3% 0.3%/0.2%
Fed Beige Book
UK May Unemployment Ch â€˜000 7.7 10
May House Prices net bal % 15 10
Can Apr New Motor Vehicle Sales 1.1% â€“1.0%
Apr Manufacturing Shipments 1.6% 0.6%
Latest Research papers/Publication
â€¢ NZ Interest Rate Strategy Weekly (13 June)
â€¢ NZ Q1 Terms of Trade Review (12 June)
â€¢ NZ Weekly Forex Outlook (12 June)
â€¢ NZ June RBNZ MPS Review (8 June)
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)
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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