Wednesday March 21, 2007 - 21:33:24 GMT
Share This Story
Westpac Institutional Bank - www.westpac.co.nz
Forex Market News - Westpac Institutional Bank Morning ReportNew Zealand Dollar NZD continues to âMarchâ higher
The NZD continued its relentless march higher yesterday as yield related buying saw stop loss orders taken out at 0.7070. However, with momentum temporarily exhausted around the same level, the NZD fell back marginally to end the day near 0.7060. In data released credit card billings rose 1.6% in February to be 8.2% higher for the year; the date serves to show that we are continuing to spend up at large and suggests that February retail sales will likely be strong. NZD strength continued overnight, this time prompted by broad based USD weakness in the wake of the US Federal Reserve keeping interest rates steady while moving away from previous suggestions of further interest rate hikes.
Australian Dollar: Strong sentiment supports AUD
The AUD struggled to make any headway from the pervious days break above 0.8000 yesterday as it drifted in a narrow range while finding good support above 0.8020. Sentiment was buoyed by data released which showed the Westpac-Melbourne Institute Leading Index of Economic Activity was at 4.8% in January, above its long-term trend of 3.9%. The AUD also benefited from USD weakness overnight and opens this morning around last nights high of 0.8080.
Major Currencies: EUR surges to 2-year high after FOMC
The USD slumped to a two year low against the euro following the FOMC statement. Although the Fed kept US interest rates unchanged at 5.25% and reiterated that inflation remains a concern, they removed the reference to the possibility of further rate hikes, in effect removing the tightening bias. The euro surged upon the release, rushing to high of 1.3390, while USD/JPY
fell to a low of 117.15. Having fallen following the release of dovish BoE MPC minutes, Sterling
US Fed on hold but tightening bias softened. The Fed left rates unchanged at 5.25% but adjusted the press statement substantially. They downgraded their recent housing and growth assessment, but upgraded their inflation assessment. The upside risk to inflation was left in place, but most importantly, the policy outlook, previously suggesting âadditional firmingâ may be required, is now neutral. In other words, the Fed is now suggesting that there are three options for future FOMC meetings: a cut, no change or a hike, whereas previously it was either on hold or a rate rise. Given the Fedâs inflation view, that is still a very mild tightening bias, but clearly less so than previously. The near instant 90 point gain on the Dow on this news shows that equity markets believe that the âGreenspan putâ is still Fed policy!
Solid Canadian data â only a modest retail pullback of 0.2% in Jan after a strong Dec, and an accelerating leading index, up 0.7% in Feb.
The minutes to the March BoE MPC meeting showed a surprise 8:1 vote, with the dissenter to the on-hold decision, American David Blanchflower, voting for a 25bps rate cut. The two hawks who voted unsuccessfully for a 25bps hike in Feb, Andrew Sentance and Tim Besley, sided with the majority this time round.
UK Chancellor Brownâs budget contained some surprises in the detail but the bottom line was neutral, as the headline grabbing measures were all offsetting. For example, the basic rate of tax was cut from 22p in the pound to 20p from next year, and the threshold that the top 40p rate comes in at was raised â but this was offset by higher national insurance payments for wealthier taxpayers and the removal of the lowest 10p income tax rate. Lower company tax (28% from 30%) was offset by higher imposts elsewhere. The reality is that public finances are not in brilliant shape, so there wasnât much extra to spend. In fact spending plans already locked in from previous years imply a reducing fiscal stimulus over the next few years, and that has not changed. As such, the budget is neutral from a monetary policy perspective.
Country Release Last Forecast
US Initial Jobless Claims w/e 17/3 318k 315k
Feb Leading Index 0.1% â0.3%
Fedspeak: Kroszner and Lacker
Jpn Q1 BSI Large Manufacturing 7.1 n/f
Q1 BSI Large Non-Manufacturing 6.4 n/f
Feb Trade Balance ÂĽbn 1086 411
2006 Nationwide Land Prices, ann â2.8% â0.5%
Eur Jan Trade Balance âŹbn s.a. 0.7 2.3
Jan Industrial Orders 2.8% â1.0%
UK Feb Retail Sales â1.8% 0.9%
Latest Research papers/Publication
â˘ NZ Weekly Forex Outlook (19 March)
â˘ Bubble, Schmubble (16 March)
â˘ NZ Agribiz March 2007 (15 March)
â˘ NZ Weekly Forex Outlook (12 March)
â˘ RBNZ MPS Review (8 March)
â˘ NZ Q4 Terms of Trade (8 March)
â˘ Rent apart (6 March)
â˘ NZ Weekly Forex Outlook (5 March)
â˘ RBNZ MPS Preview (2 March)
These papers/publications are available on Online Research on Westpac
Institutional Bankâs 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. ÂŠ 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.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."