Wednesday February 14, 2007 - 20:25:53 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research: Westpac Institutional Bank Morning ReportNew Zealand Dollar Bernanke comments boost NZD
A quiet trading session yesterday saw the NZD trade under 0.6900 until a late AUD inspired rally dragged the currency to its high of 0.6912. Comments from US Federal Reserve Chairman Bernanke saw a broad-based USD sell-off which pushed the NZD to its overnight high of 0.6948, which is around where we open this morning. Today we await NZ retail trade data, our expectations of a strong number would likely lead to a further surge in the NZD.
Australian Dollar: AUD back at 3 week highs
The AUD had a quiet local session as well, trading a 22pt range. Like nthe NZD, the AUD made good gains overnight on the back of the USDâ€™s weakness. The high in the AUD was 0.7849 overnight and opens close to these levels this morning. Australian consumer sentiment released yesterday showed a strong rise for February, at 3.2% higher than February 2006.
Major Currencies: USD drops on Bernanke comments
The USD lost ground last night after Federal Reserve Chairman Ben Bernanke said US inflation pressures were starting to ease though he added that it would be some time before the Fed can be sure. The comments which were more dovish than expected, have increased chances of an interest rate cut later in the year. EUR/USD
rose to a six week high of 1.3152 on the comments, breaking above the 1.3100 level for the first time since early Jan. USD/JPY
fell to an intraday low of 120.62 after spending much of the local session range trading above 121.00. Elsewhere the Sterling
rose nearly 200 points on a hawkish question and answer session following the BoEâ€™s inflation report.
Japan's Dec current account surplus ÂĄ1873bn,
down from ÂĄ1951bn in Nov. For Q4 as a whole the current account widened more than ÂĄ1trn, an impressive move.
Fed chair Ben Bernankeâ€™s testimony contained no surprises.
He acknowledged a steeper than expected housing downturn, but said it had not â€śspilled over to any significant extent to other sectorsâ€ť and in any case â€śtentative signs of stabilisation have recently appeared in the housing marketâ€ť. At the same time, inflation has fallen, though core inflation remains â€śsomewhat elevatedâ€ť. The FOMCâ€™s central tendency forecast for the core PCE deflator in 2008 is 1.75-2.0%, down from 2.0-2.25% this year, but â€śthat inflation will not moderate as expected is the predominant policy concern.â€ť
US retail sales growth stalled in Jan,
because of drag from auto sales and falling gasoline prices. But excluding those factors spending was up a solid 0.5%, especially given the decent 1.0% ex auto/gas rise in Dec. Also, revisions were positive, especially to Dec, and we suspect that January might ultimately be revised higher too, given the spike in weekly retail indicators at the end of last month.
US business inventories were flat in Dec.
That is weaker than the Commerce Dept assumed when calculating Q4 GDP, and along with the wider trade deficit, these figures mean that growth in the last quarter is likely to be revised down from 3.5% to around 2.5%.
UK unemployment fell 14k in Jan
and, along with a 4k downward revision to Dec, that was enough to pull the benefit claimant jobless rate down below 3% for the first time in almost a year. But despite this apparent tightening of the labour market, wages growth is not accelerating.
The BoEâ€™s quarterly inflation report
showed the CPI central projection falling below the 2% target by the end of this year, rising back to 2% by early 2009, then falling again. That path is based on market interest rate expectations (which imply a further BoE rate rise in Q2); the constant rate assumption showed the CPI rising to 2.2% in early 2009. Hence, there is some upside risk to Westpacâ€™s view the BoE will hold rates steady this year.
Country Release Last Forecast
NZ Q4 Retail Trade 1.0% 2.1%
Dec Retail Trade â€“0.2% 1.3%
Aus Q4 House Price Index 2.2% 1.5%
Feb MI Inflationary Expectations 3.5% n/f
RBA Monthly Bulletin
US Fedspeak: Bernanke
Initial Jobless Claims 311k 310k
Jan Import Prices 1.1% â€“1.0%
Feb NY Fed Empire State Survey 9.1 5.0
Dec TIC Data USDbn 74.9 70.0
Jan Industrial Production 0.4% â€“0.4%
Jan Capacity Utilisation % 81.8 81.5
Feb Philadelphia Fed 8.3 â€“1.0
Feb NAHB Housing Market Index 35 33
Jpn Q4 GDP %qtr 0.2% 0.8%
Eur ECB Monthly Bulletin
UK Jan House Price Balance % 37% 35%
Jan Retail Sales 1.1% 0.5%
Can Dec Manufacturing Shipments 2.3% 0.5%
Latest Research papers/Publication
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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