Forex Exchange Morning Report

Daily Forex Fundamentals | Written by Westpac Institutional Bank | Jul 25 08 01:33 GMT |

News And Views The USD looked quite comfortable in the London morning but then came under pressure in early NY as the Dow traded down more than 100pts on the return of worries over financial stocks and poor housing data. The damage to USD was limited overall, however, despite equities extending their losses (Dow -270pts late NY). Previous tentative optimism was punctured by Pimco's prediction that falling house prices would force a total of $1 trillion in writedowns and June existing home sales were weaker than expected, hitting a decade low. The S&P 500 Homebuilders Index was down a hefty -12% in late NY trade. The New Zealand dollar gained from 0.7405/10 to 0.7440 at the peak of USD selling but later dipped below 0.7400 before a late bounce to 0.7420. The Australian dollar hit a high of 0.9637 in the NY morning, tumbled as low as 0.9565 then climbed back to the 0.9580 area. USD/JPY had the clearest trend of all, ratcheting down from 107.80 to 107.24, keenly watching equities. EUR/USD was smacked 50pts lower on a dismal reading on the German IFO survey and enjoyed only a brief rally through 1.5700 on USD selling before softening once again. US June existing home sales fell to 4.86mn from 4.99mn in May, another all time low for this series (series began in 1999). The detail of the report showed a housing market where single-family homes are bearing the brunt of the downturn, with little prospect of a fundamental turnaround until inventories have returned to more normal levels and mortgage credit flows more easily again. US jobless claims rise to 406k from a revised 372k. The spike in claims seems to be largely an artefact of a mis-match in timing of the seasonal adjustment factors with the timing of automotive related layoffs. Japan, a June bounce in both imports & export - trade surplus narrows. Exports edged up 0.9% in the month but the surplus narrowed to JPY135bn from JPY652 in May as imports bounced boosted by higher crude oil prices. Rising import prices, particularly for commodities and energy has lead to a deterioration in the Japanese terms of trade. The Eurozone PMIs were weaker than expected in July, with manufacturing down from 49.2 to 47.5 and services down from 49.1 to 48.3. German Ifo soft for July. The business climate index fell to 97.5, its first print below 100 since December 2005. UK retail sales down 3.9% in June. Retail sales plunged in June at the fastest pace since records began in 1986 after seeing the largest monthly rise on record in May. Outlook Given weakness in the NZ economy, we continue to like NZD/USD lower multi week especially on a TWI basis. The RBNZ's rate cut and dovish statement just reinforced our view. Events Today Date Country Release Last Forecast 25-Jul US Jun Durable Goods Orders flat -0.5% Jun New Home Sales -2.5% -2.0% Jul UoM Consumer Sentiment (F) 56.6a 56.6 Jpn Jun National CPI %yr 1.3% 1.90% Jul Tokyo CPI %yr 1.5% 1.80% Jun Corp. Services Prices %yr 0.6% 0.60% Eur Jun Money Supply M3 %yr 10.5% 10.30% UK Q2 GDP 0.3% 0.20% 28-Jul NZ Jun Merchandise Trade NZDmn -196 -170 Aus Q2 NAB Business Confidence -4 - US Fedspeak: Mishkin 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.