Forex Exchange Morning Report

Daily Forex Fundamentals | Written by Westpac Institutional Bank | Nov 24 08 01:14 GMT |

News And Views As an interlude in the larger picture of gloom, Friday's European and US sessions received a few crumbs of optimism: news of the expected appointment of highly regarded Timothy Geithner as US Treasury Secretary, which then led to a Dow recovery to its important 8000 level. A potential replacement for Fed chairman Bernanke was also mooted. After Friday's plunge into new territory, to a low of 0.5235, a correction took the NZD to around 0.53, The Dow's strong close sees the NZD trading at just under the 0.54 resistance level. Interest rates fell by around 17 bp for both short and long maturities, an indication that traders have still not invested fully. Fonterra's revised milk payout to 6.00, although widely expected, adds a sense of impending weakness in the corporate sector. AUD's low on Friday was 0.6157, and like the NZD, is trading at its 24 hour high of 0.6330, thanks to the Dow. EUR's equity-induced optimism took it from the 1.25 area to just under 1.26. JPY, conversely, weakened against the USD, from 94.45 to around 96 currently. Euroland advance PMIs very weak. The factory PMI fell from 41.1 to 36.2 and the services PMI slipped from 45.8 to 43.3 in Nov. These results point to a deepening recession across the continent. Other data included a 0.4% drop in French consumer spending in October. Canadian CPI drops from 3.4% yr to 2.6% yr in Oct. Sharply lower than expected inflation due to falling transport costs (including fuel) more than offset the impact of the weaker C$ on import prices. The core rate was steady at 1.7% yr. Outlook Our weak outlook for the NZD remains, unless US equity markets follow through with Fridays recovery. The preferred scenario is the Dow continues its downward trend, which suggests 0.54 remains the ceiling on the day, with minor support at 0.5335, and a more important one at 0.50. Should the Dow recovery continue, NZD will break back above the key 0.54 level, and trade higher over the next few days. Date Country Release Last Forecast 24-Nov US Oct Existing Home Sales 5.50% –3.5% Eur Sep Current Account €bn sa –8.4 – Sep Industrial Orders –1.2% –3.0% Ger Nov Ifo Business Climate Index 90.2 89.5 UK Nov House Prices %yr Pre-Budget Report –14.6% –15.6% 25-Nov NZ RBNZ Inflation Expect 2yr Ahead 3.0% 3.00% US Q3 GDP Prelim ann’lsd % –0.3% –0.5% Sep House Prices %yr –16.6% –16.5% Sep House Prices –0.6% –0.7% Nov CB Consumer Confidence 38.0 36 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.