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Morning Report

The main news was oil and equity related

Tue, Jul 22 2008, 06:05 GMT
by Westpac Institutional Bank Team

Westpac Institutional Bank

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.

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Published on  Tue, Jul 22 2008, 06:10 GMT

Archive

• US consumer confidence rose to 56.9 in Aug
  Published On Wed, Aug 27 2008, 10:18 GMT
• USD traded softer to start the week as US stock prices tumbled
  Published On Tue, Aug 26 2008, 08:19 GMT
• USD/JPY ground up from 109.00 to flicker above 110.00 in late NY
  Published On Mon, Aug 25 2008, 06:48 GMT
• US Philly Fed index improved to –12.7 in Aug
  Published On Fri, Aug 22 2008, 05:55 GMT
• Japanese June all-industry activity index fell 0.9%
  Published On Thu, Aug 21 2008, 05:58 GMT

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Westpac Institutional Bank  | ABN 33 007 457 14
http://www.westpac.co.nz | natalie_denne@westpac.co.nz