Tuesday December 19, 2006 - 20:42:36 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar NZD benefits from weak USD
The NZD was in a holding pattern during local trading on Tuesday but was given a boost offshore by a broadly weaker USD. The NZD held on to the 0.6900 handle for all of local trading yesterday and
became a benefactor of the weaker USD to trade up to 0.6950 early this morning, the highest level since January 2006. Volatility is expected to pick up prior to Christmas with two pieces of key economic data due for release this morning and tomorrow. Westpac McDermott Miller consumer confidence rose to 119.7, its biggest rise in six years, further underscoring the potential for household spending to be resilient heading into next year.
Australian Dollar: AUD finds support at 78 US cents
The AUD continued to trade quietly during the domestic time zone on Tuesday and managed to find good support at 0.7800. There is little data to provide direction for the AUD prior to the Christmas break and offshore flows will determine the path of the currency. Overnight the AUD followed the euro higher against the USD and was further helped by pre-Christmas selling of USD to help square tradersâ€™ books. The AUD opens this morning at 0.7845, a six-day high.
Major Currencies: Euro back to 1.3200
rallied to session highs as the greenback sold off across the board. The euro remained underpinned throughout the offshore session on the back of a stronger German IFO number and eventually took out stop loss orders through 1.3185 and continued on to test the key resistance level of 1.3200. The euroâ€™s move came despite a huge headline US PPI result and strength in US housing starts data. USD/JPY
softened overnight on talk of a bearish USD/JPY think tank report. This pair has so far failed to break through heavy resistance at 118.30-50. Not to be outshone, GBP/USD
posted gains offshore as data showed UK house prices rose in Nov for a 13th straight month, helping to cement expectations of higher interest rates early next year.
US Nov PPIs rebound.
The headline PPI surged 2.0%. Much of the increase was driven by ex-food and energy prices, which rose 1.3% - its largest gain in 26 years. Both measure were rebounding off sizeable falls in October. Nevertheless, they well exceeded market expectations. Plunging vehicle pries in October were completely reversed in November. The headline was also boosted by a rebound in gasoline and gas prices. Outside of energy and vehicles the PPIs were unalarming.
US Nov housing mixed.
Housing starts showed some bottoming out, lifting 6.7% over the month. Weather will have played a part: relatively cool in October but mild in November. The continued decline in housing permits, down 3.0% to a 9-year low, suggests construction of homes will remain relatively soft until a backlog of unsold homes is cleared.
Canadian core inflation edges down.
The BoC core CPI for November of 2.2% was a tick down from 2.3% in October, though not quite as low as the market was looking for. The headline CPI rebounded to 1.4% from 0.9%, though conversely was a touch below expectations.
German IFO comes to life.
In December the business climate index rose to 108.7 from 106.8, reaching its highest level since Germany was reunified in 1990. Elsewhere, November PPIs were steady, though that edged the annual rate up a tick to 4.7%.
UK RICS house price balance.
The November Royal Institute of Chartered Surveyors' price balance edged down to 47.4%, little changed from its 47.7% 4-year high. Though the measure stopped rising, it still indicates that the market is holding up for now.
Country Release Last Forecast
NZ Q4 Current Account $mn â€“3,084 â€“5,196
Aust Oct Westpac-MI Leading Index 5.3% n/f
UK BoE MPC Minutes 7:2 9:0
Q3 Business Investment (F) 3.1% a 3.1%
Nov PSNCR Â£bn â€“8.4 4.4
Nov M4 Money Supply %yr 14.1% n/f
Dec CBI Distributive Trades Survey â€“9 n/f
Can Oct Wholesale Sales â€“1.6% n/f
Latest Research papers/Publication
â€¢ NZ Q4 Consumer Confidence (20 December)
â€¢ NZ Weekly Forex Outlook (18 December)
â€¢ NZ Q3 GDP Preview (15 December)
â€¢ NZ HYEFU/BPS Preview (13 December)
â€¢ NZ Q3 Current Account Preview (13 December)
â€¢ NZ Q3 Terms of Trade (11 December)
â€¢ NZ Weekly Forex Outlook (11 December)
â€¢ RBNZ Dec MPS Review (7 December)
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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