Tuesday March 6, 2007 - 20:53:36 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Westpac Institutional Bank Morning ReportNew Zealand Dollar NZD hits 0.6800 as risk aversion thrown to the wind
Opening in the mid 0.6700â€™s yesterday morning, NZD/USD struggled to hold its footing first up as risk aversion and stop loss selling took the currency to an intraday low of 0.6721. The foray down at these levels was brief though as the currency recovered strongly on buying interest against both the USD and JPY. Another catalyst for the NZDâ€™s reversal was the tentative rebound in Asian stocks â€“ the Nikkei posted a 200 point rise in yesterdayâ€™s session. At our close the currency was trading around 0.6800 and struggled to find much more on the topside in overnight trading where the currency touched a high of 0.6822.
Australian Dollar: January trade deficit narrows
AUD/USD opened around 0.7730 yesterday but slumped to an intraday low of 0.7682 as stops were triggered just below 0.7700. Like the NZD, the AUD benefited from a renewed interest in carry trades and
the resurgent Asian equity markets. This saw AUD/USD rebound from its lows and push through 0.7700. Januaryâ€™s trade deficit data was released in early afternoon and was better than expected which saw AUD/USD rally 20 points. Building approvals data was also released posting a fall but this data was largely ignored by financial markets. Offshore trading helped AUD/USD push higher on the back of speculative buying and the currency posted an intraday high of 0.7755.
Major Currencies: JPY weakens as share markets reverse direction
Most activity was again focussed on the JPY yesterday as the currency continued to rally early in our day. However direction soon changed when opening rallies on the Australian, Japanese and Hong Kong share markets saw the JPY quickly reverse direction, with the currency now seeming to have exhausted itself for now after its recent meteoric rise. This theme continued as the new day dawned in each centre, with London and New York also continuing the trend. Elsewhere, USD sentiment was buoyed by slightly better-than-expected data, in particular US productivity and unit labour costs.
US Q4 productivity growth revised down from 3.0% to 1.6% annualised.
Q4 productivity growth was revised down sharply, reflecting the downward revision to non-farm GDP growth, although there was a modest offset from a downward revision to hours worked. But the big surprise was the sharply higher estimate for employee compensation in the quarter, which in turn boosted unit labour costs dramatically. But at the same time, unit non-labour costs were revised down sharply.
US factory goods orders fall 5.6% in Jan.
Factory orders fell more sharply than expected due to a downward revision to the durables component, previously reported as â€“7.8%, now â€“8.7%. Ex transport orders were the main driver of that downward revision. This puts even more pressure on the February durable orders report in three weeks to show a decent bounce: if it doesnâ€™t, then it would become harder to argue â€“ as we do â€“ that the US economy is merely experiencing a weather-related soft patch.
US pending home sales fall 4.1% in Jan.
That looks steep but it did not fully reverse the prior monthâ€™s rise; the level of sales was the second highest reading since August last year (after Dec). The National Association of Realtors, who compile the data, blamed the weather for the recent swings but maintained that â€śa modest recovery is likelyâ€ť.
Former Fed chair Alan Greenspan
was quoted as saying that he saw a one-third chance of a recession this year. He did not say what probability he had attached to a recession in 2001 when he tightened rates in mid 2000.
The Bank of Canada left rates unchanged at 4.25%
and judged yet again â€śthat the risks to its inflation projection are roughly balancedâ€ť. Building permits surged 11.3% in Jan.
Euroland retail sales posted a 1.0% fall in Jan,
reflecting the already reported 5.1% drop in Germany, due to the January VAT hike. Euroland GDP growth was unrevised at 0.9% in Q4 last year.
UK retail survey robust.
The BRC survey continued to accelerate in Feb, with both same store and total sales measures stronger for the third month running.
Country Release Last Forecast
Aust RBA Policy Announcement 6.25% 6.25%
Q4 GDP 0.3% 0.3%
RBA Assistant Governor Edey speech
US Feb ADP Private Payrolls châ€™ 126k 100k
Jan Consumer Credit USDbn 6.0 6.9
Fed Beige Book
Ger Jan Factory Orders â€“0.2% 0.8%
UK Feb Consumer Confidence 84 82
Latest Research papers/Publication
â€˘ Rent apart (6 March)
â€˘ NZ Weekly Forex Outlook (5 March)
â€˘ RBNZ MPS Preview (2 March)
â€˘ NZ Weekly Forex Outlook (26 February)
â€˘ NZ Weekly Forex Outlook (19 February)
â€˘ NZ Household debt: Why it has soared (16 February)
â€˘ NZ Q4 Retail Sales Review (15 February)
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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