Foreign exchange Sydney Close Overnight Range* Sydney close O/n range Latest EUR 1.5785 1.5765/1.5897 1.5786 JPY 99.71 99.22/99.95 99.69 GBP 1.9872 1.9813/1.9945 1.9846 CHF 0.9964 0.9870/0.9979 0.9934 NZD 0.7915 0.7846/0.7924 0.7860 AUD 0.9162 0.9103/0.9180 0.9129 AUD TWI 68.9 Upcoming events (mkt f/c %mth unless indicated) Today Aus RBA policy announcement (last 7.25%, f/c 7.25%, WBC 7.25%) Jpn Q1 Tankan large manuf. (last 19, f/c 12, WBC 15) Tonight US Mar ISM manufacturing (last 48.3, f/c 47.9, WBC 48.0) US Feb construction spending (last –1.7%, f/c –1.0%, WBC –1.2%) US Mar vehicle sales (last 15.4M, f/c 15.5M) Australian dollar EUR runs for high but fails. The euro benefited from higher than expected CPI figures, briefly attempted a run at its lifetime high of 1.59 before pulling back below 1.58. The yen was inevitably dominated by financial year-end flows, with a large USD/JPY buy order pushing it back above 100 at the start of the Tokyo session. The pound rode on the euro’s short-lived bounce but otherwise struggled. But the fun and games were again in the higher yielders. The New Zealand dollar was weaker again overnight, slipping from 0.7950 before finding support below 0.7850. The sharp fall in yesterday’s business confidence survey encouraged real money accounts to add to their short NZD positions, and selling out of Asia was also noted, despite the launch of several new investment trusts that tend to invest a portion in NZD. The Australian dollar also traded heavy, though it did outperform the NZD, with the cross rate rising to a three-week low above 1.1600. Commodity prices were weaker across the board, with ‘soft’ commodities hit particularly hard, but gold and oil were down sharply as well. Economic data and events The Chicago PMI business barometer rose to 48.2 in March, up from a six-year low of 44.5 in Feb. This reinforced a general pattern amongst regional surveys - that while they were negative in Mar they were not as negative as in Feb. The national manufacturing ISM to be released tomorrow may thus prove more resilient than the market expects (mkt expectation of 47.5 vs 48.0 in Feb). The Chicago PMI showed that new orders advanced after two months of decline (53.9 in Mar vs 48.8 in Feb) and that production was broadly stable at 50.4. Employment was weak at 44.6 but up from an extreme of 33.5 in Feb. However, the order backlog continued to deteriorate (36.8 vs 38.3 in Feb) and inventories are being scaled back (42.0 vs 46.0 in Feb). The Milwaukee PMI fell into line with the picture of a contracting manufacturing sector, with the index down 6pts to 47 in Mar. Euroland CPI accelerated to 3.5%yr in March, the fastest pace in almost 16 years, boosted by higher food and energy prices. With inflation trending higher (up from 1.8% in mid-2007) and well above the 2% target, the ECB will remain concerned. This argues against an imminent rate cut. We don’t expect the ECB to start cutting rates until June. The good news is that the spike in inflation is likely to be temporary. Notably, core inflation remains steady and at 1.8% in Feb was fractionally below the 12 mth avg of 1.9%. Detailed CPI data for Mar will be released on 16 Apr. Euroland M3 growth moderated to 11.3% in February down from a peak of 12.4% in Dec. Loan growth to the private sector also moderated a little, easing to 10.9% in Feb from 11.1% last month. Even so, for the ECB, both M3 and loans are expanding at a relatively strong pace. The European sentiment surveys covering the household and business sectors were mostly steady in March. Consumer confidence held at –12, which compares with –2 in mid-2007. Although business confidence held at 0, prospects for future production continued to moderate, easing 2pts. By contrast, past production rebounded 3pts. The business climate index showed some resilience in Mar, edging up from the Feb low to be at 0.80. That still represents a moderation from conditions at the end of 2007, when the 3mth avg was 0.93 and from mid 2007, when the index was tracking at 1.42. The outlook, in our view, is for more subdued growth as the various negatives impact (US slowdown, tighter credit conditions, rising energy costs and appreciating euro). Close/Latest Change ASX/S&P 200 5355.70 4.60 Aust SPI 200 5410.00 14.00 Nikkei 225 12525.54 -294.93 FTSE 5702.10 9.20 Dow Jones Ind 12262.89 46.49 Nasdaq 2279.10 17.92 Gold 917.01 -17.93 Oil (Nymex) 101.76 -3.86 CRB 386.89 -7.65 Latest/Sycom** Change US Fed funds 2.25 0.00 US 2yr note 1.60 -0.05 US 10yr bond 3.42 -0.02 RBA cash 7.25 0.00 Aust 90d BB future 7.77 0.00 Aust 3yr bond future 6.13 0.03 Aust 10yr bond future 6.04 0.02 WCFI 308.07 -8.55 Westpac Institutional Banking Group • Economic Research • www.westpac.com.au • Enquiries 612 8254 8720 * Overnight trading ranges are indicative only. If you have any queries regarding overnight trading please contact your Westpac dealer. ** (Sycom Latest) Implied Yield. Change is implied yield. ^as at 07:40 AEST Westpac Institutional Bank is a division of Westpac Banking Corporation ABN 33 007 457 141. Information current as at date above. 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. Westpac’s financial services guide can be obtained by calling 132 032, 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. If you wish to be removed from our e-mail, fax or mailing list please send an e-mail to economics@westpac.com.au or fax us on +61 2 8254 6934 or write to Westpac Economics at Level 2, 275 Kent Street, Sydney NSW 2000. Please state your full name, telephone/fax number and company details on all correspondence. © 2008 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.
31st-March-2008 | 
