Thursday September 14, 2006 - 21:44:36 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar NZD posts 6 month high
The RBNZ provided a dose of reality yesterday with a more hawkish than expected Monetary Policy Statement.
Reading between the lines Bollardâ€™s message was quite simple â€“ the RBNZ had little tolerance for further upside inflation surprises with the main concern being rampant house prices. The effect on the NZD/USD was quite dramatic, with the currency pair jumping from 0.6460 to 0.6540 and NZD/AUD from 0.8584 to 0.8696. The RBNZ is virtually inviting the world to resume the NZD carry trade and new Uridashi issuance. This was evident overnight as the NZD punched through 0.6600 to post a six month high of 0.6651 before settling back to open this morning around 0.6605.
Australian Dollar: Resilient AUD refuses to collapse
The AUD may have fallen to a six month low against the NZD yesterday but managed to hold its ground against the USD above 0.7500 as gold extended its gains in Asian trade. On a day bereft of any major local data and the spotlight clearly on the NZD, the AUD drifted off its high of 0.7545 seen in the morning to flounder around the 0.7515 level for the rest of the session. Overnight it climbed steadily to breach the 0.7545 resistance level on its way to a 0.7569 high, however decent sized offers from good names reported in the 0.7550-85 region are currently providing a cap.
Major Currencies: US and UK retail sales robust
The euro looked to break free from a recent range as ECB chairman Trichet made comments that the bank was still monitoring inflation closely; this led to the markets pricing in a further chance of an interest rate hike at the next ECB policy meeting. The euro climbed to a high of 1.2750 following Trichet's comments but gains where trimmed when US. Aug retail sales result came out slightly better than expected. The yen traded a tight range yesterday with a high of 117.77; today it opens at 117.52. The UK retail sales result was upbeat. This saw the GBP reach a high of 1.8920 and today it opens at 1.8865. The Swiss franc failed to make ground despite the central bank lifting interest rates 25bps. Attention tonight will be on US CPI for Aug, also the G7 meeting takes place over the weekend and this could see members calling for greater currency flexibility in Asia.
US retail sales up 0.2% in Aug.
Retail sales posted a modest rise in August, because auto sales did not fall away in line with the previously published industry data. Ex auto sales were subdued, but that was partly due to a 1.0% fall in gasoline sales. Ex auto sales (0.6%) were revised down by 0.4 ppts, about half of which was due to a lower gasoline sales estimate. Leaving aside autos and gas, sales were up a moderate 0.4%, on top of a 0.5% rise in July (revised down 0.2 ppts). Thatâ€™s not a bad performance.
US business inventories grew 0.6% in July,
their slowest pace since February. This is an early sign that inventories could be a slight drag on growth in the third quarter.
US import prices rose 0.8% in August,
this survey apparently not capturing the decline in energy prices towards the end of the month.
US initial jobless claims down 5k to 308k.
Initial claims have trended lower since early Aug, suggesting that firms are laying off fewer workers. But continuing claims, at 2.5mn, compare to comfortably below 2.4mn in April. That points to some increased difficulties in the job-seeking market.
The Swiss National Bank lifted the 3m LIBOR target by 25bp to 1.75%.
The Bank said gradual rate rises would likely continue if its forecasts were achieved.
UK retail sales rose 0.3% in August,
from an upwardly revised to flat July. Although the recently monthly profile looks subdued, it follows a very strong Q2, when there were weather and World Cup boosts â€“ yet now, with Julyâ€™s fall revised away, no pull-back whatsoever. UK consumer spending is holding up well in Q3.
Country Release Last Forecast
NZ Q2 Manufacturing Real Sales 0.1% n/f
US Aug CPI/ex food & energy 0.4%/0.2% 0.2%/0.3%
Sep NY Fed Empire State Index 10.3 22.0
Aug Industrial Production 0.4% flat
Aug Capacity Utilisation % 82.4 82.3
Sep UoM Consumer Sentiment (Prelim) 82.0 83.5
Jpn Jul Tertiary Industry Index â€“0.6% 0.3%
Eur Aug CPI (F) 2.3%a 2.3%
Jul Trade Balance â‚¬bn s.a. â€“1.1 n/f
Can Jul Auto Sales â€“0.6% 3.0%
Latest Research papers/Publication
â€¢ RBNZ Sep MPS Review (14 September)
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)
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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