Forex Exchange Morning Report

Daily Forex Fundamentals | Written by Westpac Institutional Bank | Jul 22 08 01:18 GMT |

News And Views The offshore session was again relatively quiet last night. The main news was oil and equity related. London morning traders were concerned about a potential bounce in oil following the lack of progress in weekend talks with Iran. This saw the USD offered before better than expected Bank of America results which helped Wall St open firmer. This sparked USD recovery but as stocks lost steam, the greenback settled down again to be little changed overall. The New Zealand dollar was relatively soft all night, slipping below 0.7600 before a flicker higher in late NY. The Australian dollar was driven by the USD but was largely directionless, trading a tight range of about 0.9740/0.9768. USD/JPY was the biggest mover of the majors, both down on the softer USD early and then back up again as risk appetite improved – the range was 106.37/107.15. EUR/USD found little European news to inspire it and traded a 1.5832/1.5909 range, finishing NY on a firm note as US equities faded late. US leading index slips 0.1% in June. Quite a weak result, because it was distorted upwards by building permits which were boosted by the scramble to get apartments approved before the July 1 change to the building code. That component added 0.3 ppts to the index whereas it would have subtracted nearly 0.2 ppts if permits had fallen in line with the fall in single family permits in June. What's more, the May result was revised down from a 0.1% gain to a 0.2% fall. That means that apart from a 0.1% rise in April, the leading index has been flat or falling consistently since October last year, consistent with the view that H2 2008 will be a tough time for the US economy. UK housing market news bleak. Rightmove, the property website, reported a 1.8% fall in house prices in July, and the stock of housing for sale was the highest on record. Bank of England dove David Blanchflower predicted a 30% fall in house prices and said the economy may already be in recession. Outlook We continue to like NZD/USD lower multi week especially on a TWI basis. For now, with a rate cut 70% priced for Thursday's RBNZ meeting the NZD is likely to trade soft but the move should be more of a grind ahead of the meeting than anything more dramatic. Events Today Date Country Release Last Forecast 22-Jul US Jul Richmond Fed –12 –8 May House Prices –0.8% –0.6% Fedspeak: Plosser Jpn May All-Industry Activity Index 0.80% 0.40% Can May Retail Sales 0.60% 0.70% 23-Jul Aus Q2 Headline CPI %qtr 1.30% 1.20% Q2 Avg RBA Underlying CPI %qtr 1.20% 1.20% US Fed Beige Book Fedspeak: Mishkin and Kohn Eur May Industrial Orders 2.50% –1.5% UK Jul BoE Minutes 8:01 7:02 Westpac Institutional Bank http://www.wib.westpac.co.nz/ Disclaimer 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. © 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.