Risk appetite recovers on Geithner
testimony. The US dollar
found support in the London morning as risk aversion was reinforced by the IMF's prediction that global credit
losses would reach $4.1 trillion by end-2010, but DXY fell -0.3% by late NY and
risk currencies rallied in New York, with help from Treasury Sec Geithner. He testified that the
"vast majority" of US banks have more capital than needed and said he
sees signs of "thawing" in credit markets. Such sentiment helped US equities rally steeply from early losses, SPX
closing +2.1%, including a 10% rise for the banks index.
NZD/USD joined in the risk recovery, from 0.5540 to
0.5640. This left AUD/NZD chopping in the low 1.26s.
AUD/USD bounced from a London low of 0.6976 to burst above 0.7100 and
retained these gains into early Welly/Syd.
EUR/USD gyrated only modestly higher, rebuffed above
1.2980 then easing to 1.2955. Not surprisingly the safe haven yen was sold, USD/JPY
squeezing from under 98.00 in early London to 98.80. The central banks of Sweden and Canada shaved their benchmark rates to 0.50% and 0.25%
respectively. USD/CAD rallied to just above 1.2500 but then retreated to
the 1.2350 area. BoC's plans for QE are due Thursday. Treasuries sold off, the
10 year yield bouncing from 2.78% to 2.90% as equities rallied and there was
some disappointment over the scale of Fed purchases ($7.0bn).
No US data to report.
German ZEW analyst sentiment rises
from -3.5 to 13.0 in April. The
current index slipped from -89.4 to -91.6, reflecting very weak economic data,
but expectations picked up to a 2 year high, probably reflecting the stronger
stock market and optimism that the full force of monetary, fiscal, G20 and
other policy measures will ultimately restore confidence in financial
markets and the broader economy.
UK RPI inflation falls below 0% yr for first time
in 50 years. The combination of
base effects (last year's energy price gains dropping out of the calculation)
and falling mortgage rates pulled the RPI down from 0% to -0.4% yr in March.
However the preferred CPI inflation measure, which does not include mortgage
costs, eased from 3.2% yr to 2.9% yr.
Swedish Riksbank cuts rates 50bp to
0.50%, and suggests that policy
may not be eased further ("further reductions will have relatively small
effects on the economy" - Governor Ingves).
Bank of Canada cuts 25bp to 0.25%, and commits to hold rates there for a year. We
expected the cut, but the BoC went one step further by committing to remain on
hold until mid 2010, conditional on the inflation outlook. This extra step was
made in an attempt to hold longer term rates down, given that the BoC has said
it cannot cut its policy rate any further. The BoC expects Canadian GDP to
shrink 3% this year and core inflation to remain below target for more than two
years. An announcement re quantitative easing is expected Thursday when the BoC
will publish its next Monetary Policy Report.
Canadian wholesale sales fell 0.7%
in Feb, their fifth consecutive
decline, consistent with the economy entering recession.
This move downwards has built momentum during
the past few sessions, with the next target 0.5450. Should global equities
continue to soften this week, 0.5200 is foreseeable. This morning's immigration
data is expected to show strength from returning expatriates, but is unlikely
to impact the markets.
Release Last Forecast
Headline CPI %qtr â€“0.3% 0.9%
Q1 Avg RBA
Underlying CPI %qtr 0.7% 0.9%
US Feb FHFA
House Prices %yr 1.7% â€“0.7%
Merchandise Trade Balance Â¥bn 43.3 -100
UK BoE Minutes
of April Meeting
Count Change â€˜000 138 125
Unemployment Rate (3 Mths) 6.5% 6.9%
Earns Inc Bonus 3m/3m yr ago % 1.8% 1.2%
Â£bn 4.4 18.0
Supply M4 %yr 18.7% 19.9%
Leading Indicators %mth â€“1.1% â€“0.9%
â€¢ NZ Weekly
Forex Outlook (14 April)
â€¢ NZ Q1 CPI
Review (17 April)
â€¢ The money
tree (17 April)
â€¢ NZ Weekly
Forex Outlook (14 April)
â€¢ NZ Q1 CPI
Preview (8 April)
papers/publications are available on Online Research on Westpac
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