Monday September 11, 2006 - 22:25:37 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar NZD gets a boost from offshore investment bank
A firm USD restricted the NZD to a tight range on Monday with many market participants reluctant to extend positions ahead of the RBNZ interest rate announcement on Thursday. The NZD did hit a two week low of 0.6344 before finding some support after an unexpected rise in Q2 terms of trade but was well contained to finish the day around 0.6363. Overnight a US investment bank provided a fresh injection of demand by buying the NZD from 0.6365 to 0.6390 possibly linked to M&A flows. This activity was enough to push the NZD through 0.6400 however it failed to breach the 20 day moving average of 0.6418 and opens this morning back below the 0.6400 handle.
Australian Dollar: AUD at fresh 7-week low
The AUD opened on its highs around 0.7540 and drifted lower throughout the day due to a stronger USD and weakening gold prices. The AUD has now fallen about 2.6% since Australia reported weaker than expected Q2 growth in GDP last week. Overnight buying interest helped the AUD climb back towards the 0.7540 level but a fresh round of sellers pushed the currency pair down toward the 0.7500 mark and a fresh seven-week low. It opens near its low of 0.7503 this morning.
Major Currencies: Yen stumbles further on poor growth data
Weaker than expected data releases out of Japan last night has seen the yen pull back to a two month low of 117.78 against the dollar. Japanâ€™s Q2 GDP growth was 0.2% compared to an expected 0.3%, although there is continued expansion it is slower than expected. Add to this a fall in July machinery orders by 16.7%, the chance of further rate hikes in Japan seem a while away yet. The euro recovered some of last weekâ€™s losses when European Central Bank board member Juergen Stark stated that Eurozone inflation would remain above the bankâ€™s target and that higher rates would not be detrimental to the economy. nThe euro climbed to 1.2741 before cooling back to todayâ€™s open of 1.2702. The GBP continued to falter following a fall of 0.2% in UK core producer prices and a wider than expected deficit.
Japan Q2 GDP was not revised.
Growth for the quarter was 0.2% (1.0% on an annualised basis) little-revised from the 1st preliminary report at 0.2% (0.8% annualised). This left in place a sixth consecutive quarterly increase, but represented the slowest in those six quarters.
Cathy Minehan, Boston Fed president and voter on the FOMC next year, said that US growth should slow to below 3% in 2007, led by construction, but that consumer spending will moderate rather than collapse. She forecast core inflation to gradually subside but the key risk was that inflation keeps accelerating.
Speaking after the weekend G10 Summit,
Chairman Trichet went a little further, noting that the US housing market slowdown created economic uncertainty. However the G10 conclusion was only that global growth would slow â€śa little bitâ€ť next year.
Canadian housing starts fall 9.6% in August.
The steep fall, led by multiple family dwellings, took starts to the lowest level for the year so far. Single family starts rose 2.6%, nevertheless the report does play to the view that the growth in the housing/construction sector has started to moderate.
French industrial production down 1.3% in July.
The second consecutive decline â€“ a weak start to Q3.
UK data on the soft side.
The July trade deficit was ÂŁ6.3bn, wider than expected, and back revisions were unfavourable. The BoEâ€™s view that the external sector will be supportive of the economy is not being supported by the data. Also, producer price data for Aug were benign, with core output prices down 0.2%, their first fall in nearly a year.
Country Release Last Forecast
Aust RBA Annual Report
Aug NAB Business Survey 10.4 n/f
US Jul Trade Balance USDbn â€“64.8 â€“65.4
Sep IBD/TIPP Economic Optimism 45.6 46.5
Jpn Aug Domestic CGPI %yr 3.4% 3.4%
Eur Q2 Current Account â‚¬bn â€“11.4 â€“13.3
UK Aug CPI %yr 2.4% 2.5%
Jul Leading Index â€“0.1% n/f
Can Jul New House Prices 1.4% 0.8%
Jul Trade Balance CADbn 4.7 5.0
Latest Research papers/Publication
â€˘ NZ Q2 Terms of Trade Review (11 September)
â€˘ NZ Weekly Forex Outlook (11 September)
â€˘ NZ Sep RBNZ MPS Preview (8 September)
â€˘ El Nino conditions in NZ? (6 September)
â€˘ NZ manufacturing sector trends (4 September)
â€˘ NZ Weekly Forex Outlook (4 September)
â€˘ NZD: Due for a dose of reality
â€˘ NZ Weekly Forex Outlook (28 August)
â€˘ Trends in retail sector profitability (21 August)
â€˘ NZ Weekly Forex Outlook (21 August)
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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