Monday August 6, 2007 - 20:51:43 GMT
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Forex Research - Westpac Institutional Bank Morning Report
Westpac Institutional Bank Morning Report
New Zealand dollar
NZD still driven by global stock markets. The NZD fell early in yesterdayâ€™s local session as sub-prime mortgage concerns prompted risk averse investors to continue unwinding long positions, in particular NZD/JPY which fell to a two month low of 88.50. Overnight the NZD again took its lead from the US stock market as the Dow Jones strengthened by more than 2.0% on rumours that the US debt ceiling may be raised, a move which would add liquidity to the market in the hope of easing recent credit woes. The NZD strengthened to an intraday high of 0.7641 on the back of the Dowâ€™s gains and pegged back recent losses against the JPY to close around 90.50.
AUD range bound ahead of RBA announcement. The AUD remained in a fairly subdued range yesterday, trading between 0.8521 and 0.8558 as the market looks ahead to the RBAâ€™s interest rate announcement on Wednesday. With the market currently pricing in around an 85% chance of the RBA raising interest rates, market participants will watch closely to see if a tightening bias is maintained. The carry trade remained at the forefront of investors minds yesterday as the AUD fell to a low of 99.83 against the JPY on the back of continued risk aversion. Overnight however the AUD/JPY was bid back up to a high of 101.41 as stronger global stocks added some much needed stability to the market.
USD recovers ahead of FOMC. Bargain hunting in the US stock market saw the Dow rally sharply overnight, leading the USD higher as investors trimmed back some of their short positions ahead of tonightâ€™s Federal Reserve interest rate decision. Although traders are expecting rates to be kept unchanged, the accompanying statement will be closely watched, particularly any reference or acknowledgement of risks to growth in the wake of the recently surfaced problems in the credit markets. Earlier the USD fell below the key 80.00 mark on the dollar index, the first time it had fallen to around this area since September 1992.
Economic data and events
No US data to report.
Japanese preliminary leading economic index rose to 80.0 in June from 40.9 in May, meeting market expectations. The lift marked the first time that the key index has past 50 since June 2006.
UK factory sector expanding moderately. Manufacturing output grew
0.2% in June, its fourth consecutive gain, for a 0.9% yr annual rate. The broader industrial production measure was up 0.1%/0.8% yr, constrained by a fall in mining output in June. These results are broadly consistent with the recent improvement in the PMI-manufacturing.
German factory orders jump 4.6% in June. This gain, driven by an 8.7% jump in foreign orders and a more modest 0.3% rise in domestic orders, followed a solid 3.0% jump in May. Recent German industrial production data have been somewhat soft, but this orders strength suggests a bounce in output is due soon.
Date Country Release Last Forecast
7 Aug NZ Jul ANZ Comm Prices NZD 2.5% n/f
US FOMC Rate Decision 5.25% 5.25%
Q2 Productivity 1.0% 3.0%
Q2 Unit Labour Costs 1.8% 1.0%
Jun Consumer Credit $bn 12.9 2.0
Ger Jun Industrial Production 1.9% 1.0%
UK Jul BRC Retail Sales Mon %yr 3.0% 1.0%
8 Aug Aust RBA Rate Decision 6.25% 6.50%
Jun Housing Finance 0.1% 3.0%
Latest Research Papers/Publications
â€¢ NZ Q1 LCI and QES Review (6 August)
â€¢ NZ Weekly Forex Outlook (6 August)
â€¢ NZ Q2 labour market preview (1 August)
â€¢ NZ Weekly Forex Outlook (30 July)
â€¢ NZ RBNZ July OCR Review (26 July)
â€¢ NZ Interest Rate Focus (25 July)
â€¢ NZ Weekly Forex Outlook (23 July)
â€¢ You can't always get what you want (20 July)
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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