Monday December 11, 2006 - 20:22:53 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar NZD consolidates after recent strength
After its recent meteoric rise the NZD spent the day consolidating within narrow ranges yesterday, both in our trading session and in overnight trading. Some selling was noted on the release of Q3 termsof- trade data, which showed a fall of 1.9%, much weaker than market expectations. Export prices fell 0.8%, largely driven by a fall in dairy prices, while import prices rose 1.1%. The currency did manage a small rally overnight, but faltered around 0.6900 in the absence of any significant USD movement, and opens steady today around 0.6880.
Australian Dollar: AUD recovers overnight from previous days sell-off
The AUD continued to sell off early yesterday following Fridayâ€™s stronger-than-expected US jobs data before encountering support around 0.7820 in the absence of the release of any local data. However it was a different story overnight, where offshore buyers were happy to take advantage of the dip as the currency recovered all of the ground it lost in our time zone yesterday, opening today at 0.7855.
Major Currencies: USD retreats following Greenspan comments
USD gains were eroded during yesterdayâ€™s trade following remarks from former Federal Reserve Chairman Alan Greenspan. From an early low of 1.3130, the euro strengthened to 1.3249 after Greenspan commented that he expected â€śa few yearsâ€ť of USD weakness and that it is â€śimprudent to hold everything in one currencyâ€ť. While the ECBâ€™s Vitor Constancio justified recent European rate hikes as â€śnecessary to control inflationâ€ť and noted that interest rates in the Eurozone remained at â€śhistorically low levelsâ€ť, the euroâ€™s recent strength has given rise to concern among French politicians regarding the competitiveness of its export community. From an intraday high of 117.26, the USD also retreated against the yen, with market focus shifting to the FOMC meeting tonight and Japanâ€™s quarterly Tankan Survey on Friday.
Japanese consumer confidence rose in Nov.
The headline index rose to 48.9 from 48.4. Lower petrol prices are an obvious factor, as is positive media coverage on the scale of winter bonuses.
US Oct wholesale inventories up 0.8%.
The increase was close to expectations. But with sales down 0.5% for their second fall in a row and the inventories-to-sales ration at its highest in nearly 18 months, the build-up may result in wholesalers cutting back on orders from manufacturers. That would be consistent with the relatively muted levels of most manufacturing surveys recently.
UK Nov PPIs up slightly.
Output prices were flat on the month as expected though their core measure rose 0.2% - not as flat as expected. Input prices rose 0.1%, but with October revised up 0.6 ppts prices going into factories weren't as benign as expected. Nevertheless, annual growth in producer prices remains well off its peak, hinting that some of the recent prices pressures felt have dissipated.
UK visible trade deficit declines.
The Oct deficit of GBP6.3bn was smaller than expected, though partly offset by Sep's deficit getting bumped up. The deficit appears to have arrested its 2006H1 slide.
UK house prices continue to rise.
The Dept for Communities and Local Govt measure of house prices rose to 8.6% y/y from 8.0%, though was a milder rise than expected. This more lagging house price measure adds to the picture of a strengthening market, and will keep up speculation that the BoE may act again next year.
Canadian new home prices.
Prices rose 0.2% in October, a milder increase than expected. Price growth has lost some momentum in the past couple of reads, which may reduce some of the upside risk the BoC sees out of the domestic economy.
Canadian labour productivity down.
Productivity fell 0.1% in Q3, the second fall in a row and clear deceleration from 2005.
Country Release Last Forecast
Aust RBA Governor Speaking
Nov NAB Business Survey 18 n/f
US Oct Trade Balance USDbn â€“64.3 â€“61.5
Dec IBDF/TIPP Economic Optimism 55.7 52.0
Nov Federal Budget $bn â€“83.1 â€“72.4
FOMC Rate Decision 5.25% 5.25%
Jpn Nov Corp. Goods Prices %yr 2.8% 2.7%
Ger Dec ZEW Survey â€“28.5 â€“35.0
UK Nov CPI %yr 2.4% 2.6%
Dec CBI Industrial Trends Survey 5 n/f
Can Oct Trade Balance CADbn 4.0 3.8
Latest Research papers/Publication
â€˘ NZ Q3 Terms of Trade (11 December)
â€˘ NZ Weekly Forex Outlook (11 December)
â€˘ RBNZ Dec MPS Review (7 December)
â€˘ NZ labour market: purging the excesses? (6 December)
â€˘ NZ Weekly Forex Outlook (4 December)
â€˘ RBNZ Dec MPS Preview (30 November)
â€˘ NZ Weekly Forex Outlook (27 November)
â€˘ NZ Interest Rate Strategy Weekly (22 November)
â€˘ Q4 RBNZ inflation expectation measures (21 November)
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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