Forex Fundamental Analysis Reports

Forex Exchange Morning Report

New Zealand Dollar: NZD slows due to lack of wind

The NZD traded in a 40pt range yesterday, lacking any real direction until rumoured RBNZ intervention saw it fall from 0.7822 to 0.7790 in a matter of minutes. Overnight the NZD continued to be bought by offshore investors, posting a new high of 0.7841 before dipping towards then end of the session as US traders squared up short positions ahead of today's 4th of July celebrations.

Australian Dollar: AUD slows as consumers spend less

The AUD drifted lower for much of yesterday's local session as weaker than expected data prompted selling from market investors. May's retail sales data came in well below expectations, printing at -0.1% compared to market forecasts of 0.7%, while dwelling approvals data also disappointed. During the overnight session the AUD initially pushed higher on the back of continued US weakness and higher commodity prices but drifted lower late in the session as market participants look ahead to today's RBA interest rate announcement.

Major Currencies: USD steadies ahead of July 4 holiday.

Some corrective buying ahead of the Independence Day holiday today saw the USD recover slightly, however with investors mindful of central bank meetings later this week, traders were cautious about buying the currency too aggressively. The USD showed little reaction to a sharp fall in pending homes sales, its lowest level since September 2001, while a modest drop for May factory orders was also ignored. The GBP continued to rise overnight, buoyed by expectations of an interest rate hike by the Bank of England, as it again traded to a 26-year high near 2.0200.

Overnight News

US pending home sales fall 3.5% in May. Pending home sales (i.e. agreed but not completed) posted a substantial fall for the third month running, making it four out of the first five months of this year that sales have fallen. Although sales rose in the northeast and west, those gains followed much steeper declines in April so the trend in all four districts (i.e. including the midwest and south) is clearly downwards. This points to further weakness in existing home sales figures (measured at completion) heading into Q3 at the very least. It had appeared late last year that at least some housing indicators were finding a base but the weakness we now see in this sector of the market suggests a more prolonged housing slowdown is in prospect.

US factory orders fall 0.5% in May. By contrast the factory orders data were better than expected. There was an upward revision to the durables component (including core capital goods orders, up from –3.0% to –2.1%) and the non-durables gain was only partly due to gasoline prices (ex oil nondurables rose 0.7%). With shipments and inventories positive we are starting to see these official data match the positive factory sentiment apparent across most of the industry surveys from the ISM and the district Fed offices.

US weekly retail reports were soft. Chain store sales rose just 0.1% following two weekly declines earlier in June; the Redbook was down 1.1%. The consumer has clearly lost momentum compared to May when retail sales were boosted by favourable weather.

Euroland PPI inflation continued to drift lower in May, easing to 2.3% yr, assisted by favourable base effects and the stronger euro. Unemployment also fell to a new 7.0% low since these records began in the 1990s. Neither report was especially surprising given national data already published.

UK construction PMI jumped from 57.7 to 60.1 in June, indicative of ongoing strength in the sector, and at least partially mitigating recent lower readings for the services PMI (June reading due tonight).

Events Today
Date Country Release Last Forecast
4 Jul Aust RBA Policy Announcement 6.25% 6.25%
May Trade Balance, AUDbn –0.96 –1.2
Jun AiG PSI 56.1 n/f
US Independence Day Holiday
Eur Jun PMI Services (F) 58.3 a 58.3
May Retail Sales 0.2% 0.2%
UK Jun PMI Services 57.2 57.0
Q1 Mtge Equity Withdrawal £bn 14.6 15.0
Jun BRC Shop Price Index %yr 0.4% n/f
5 Jul NZ Jun ANZ Comm Prices NZD 2.7% n/f

Westpac Institutional Bank