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Wednesday March 4, 2009 - 21:11:45 GMT
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Forex Research - MORNING REPORT

MORNING REPORT Thursday 5 March 2009


News and views

A broadbased short squeeze is our best explanation for the rally in risk overnight. Add to that China's announcement yesterday of a stimulus plan, to roughly double infrastructure and manufacturing spending, as well as China's third consecutive improvement in manufacturing PMI figures. Poor US private payrolls data were ignored, and the S&P500 gained around 2.6% until NZ's open. S&P banks didn't follow suit, down 7%, neither did credit spreads, as concerns regarding the financial sector linger. Most other asset classes behaved as one would expect, WTI oil up 8%, copper up 6%, and gold down 1.5%. US 10 year treasuries weakened, up 12bp in yield, and are vulnerable to a surprise from tonight's auction announcement.

NZD's rebound was only slightly less impressive than AUD's, from yesterday's 0.4985 low to NY's 0.5075 high. The Fonterra milk powder auction result, up 16%, is in line with the mild rebound noted in food commodities this year.

AUD regained all its post-GDP losses and then some, reaching 0.6513 in New York. That's just over 2 cents in 24 hours - flagging the extent of short-AUD positioning. A Terry McCrann article pointing to an economic storm on the horizon had no obvious impact. The AUD/NZD cross climbed off its 1.2765 low to 1.2850.

GBP's rise from the 1.40 area to 1.4170 could be partly attributed to an unusually strong PMI services report. USD did manage to rally against one currency - JPY, reaching 99.50, shy of the 100 level where large option strikes sit.

US February non-manufacturing ISM fell to 41.6 in Feb after two months of improvement. It remains firmly in contractionary territory, although it is above last November's low. The breakdown showed a weakening in activity and orders, consistent with other indicators suggesting the pace of economic decline has re-accelerated in February after a brief hiatus in January. The prices paid indicator rose to almost 50 as the price-depressing effect of last year's sharp slide in gasoline prices came to an end.

US ADP Feb private payrolls showed job losses accelerating to -697k in February, consistent with official non-farm payrolls around -670k.

US corporate layoff announcements totalled 186k in Feb, fewer than January's 242k but still 158% higher than the same month last year. There is no direct correlation with payrolls as layoffs can be announced well ahead of their taking place.

Dallas Fed President Fisher warned that the 2009 Q1 contraction could be similar to Q4 2008.

Euroland February services PMI was revised up by 0.3 pts to 39.2, still well down on January and a cycle low for the series.

UK Feb services PMI stepped up to 43.2 from 42.5 in January, the third month consecutive improvement.  The low 40s reading still implies that services activity is contracting, although not at Q4's rapid pace.

UK British Retail Consortium shop price index found a higher rate of inflation on the high street in February, probably due to the weak pound and the fact that petrol prices have stopped falling.

UK Nationwide consumer confidence index rose to 43 in February, although confidence remains low.


This rally since last yesterday afternoon is corrective, against the larger picture downtrend. However, the speed of the rise is impressive, and points to further cleanouts of short positions, so that 0.51 is likely. On the day, 0.50 to 0.51 is suggested, with 0.51 vulnerable.  



Imre Speizer, Senior Market Strategist, NZ, Ph: (04) 470 8266

With contributions from Westpac Economics


Latest Research Papers/Publications

• A changing climate (4 March)

• NZ Weekly Forex Outlook (2 March)

These papers/publications are available on Online Research on Westpac

Institutional Bank’s website (


Events Today

Country Release Last Forecast

NZ Q4 Wholesale Trade Survey 3.1% -5.0%

Aus Jan Trade Balance, AUDbn 0.59 0.75

Jan Dwelling Approvals –2.9% 5.0%

US Feb Chain Store Sales %yr –1.6% –

Q4 Productivity Revisions 3.2%a 1.4%

Initial Jobless Claims w/e 28/2 667k 650k

Jan Factory Orders –3.9% –3.5%

Fedspeak: Lockhart

Jpn Q4 MOF Capital Spending %yr –13.0% –16.1%

Eur Q4 GDP Rev –1.5%a –1.5%

ECB Rate Decision 2.00% 1.50%

Ger Jan Retail Sales –0.2% 0.2%

UK BoE Rate Decision 1.00% 0.50%

Can Jan Building Permits –3.9% –

Feb Ivey PMI nsa 36.1 32.0


Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 14 November 2007. 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 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.



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GVI Trading. Potential Price Risk Scale
AA: Major, A: High, B: Medium

Tue 31 July 2018
AA JP- Bank of Japan
A 06:00 DE- Retail Sales
A 09:00 EZ- flash HICP/GDP
AA 12:30 US- Core PCE Deflator
A 14:00 US- CB Consumer Confidence
Wed 1 Aug 2018
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