Thursday April 30, 2009 - 21:47:57 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report
Morning Report Friday 1 May 2009
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US equities rose on the opening bell, but then faltered, as Chrysler's bankruptcy filing weighed on investors who were otherwise reassured by better-than-expected corporate earnings (Dow Chemical the notable result last night) and slightly improved economic data (jobless claims, regional industrial production). Chrysler filed for bankruptcy after restructuring talks with lenders broke down, and focus may now turn to the General Motors outcome. The S&P500 is unchanged from yesterday's close at time of writing. Swine flu news accelerated yesterday, the WHO saying they are in the process of moving from phase 5 to 6, and the US Homeland Security secretary saying they have been preparing for a full-fledged pandemic.
The USD currency was under pressure during early Europe due to month-end fixing dynamics. There was talk of country reserves managers selling USD across currencies. EUR rose from around 1.3300 to 1.3385, before the falling S&P500 dragged it back to the 1.3200 area. USD/JPY ran counter to other major pairs, rallying from 97.30 to 99.00.
AUD strengthened to 0.7385 on fixings, followed by choppy European and US sessions, eventually returning to the 0.7270 area where it traded during yesterday's domestic session. Rory Robertson (Macquarie economist) wrote the next RBA meeting would result in a pause, but that ultimately, the policy rate would be cut to 2.00%; there was no market impact from the story.
NZD closed the domestic session lower at 0.5660 after the dovish RBNZ package, spiking to 0.5750 in response to AUD and EUR strength, but then gyrating back to 0.5660. AUD/NZD peaked at 1.2940 at the US opening, settling back at 1.2850.
US initial jobless claims down 14k to 631k. Although initial jobless claims seem to have settled in a new range a little below their recent peak rate of 674k per week in late March, continuing claims soar ever upwards. The message is simple: layoffs are still happening at a rapid but not accelerating rate, but once unemployed, finding another job is increasingly difficult. These numbers point to payrolls continuing to decline at a 600-700k pace per month, and a sharply higher jobless rate.
US employment costs grew 0.3% in Q1, their slowest pace on record (i.e. since 1996), and at half the pace of Q4 last year. Slower growth in wages and salaries was the main driver although benefits have been drifting lower too, consistent with the soft jobs market.
US Chicago PMI up 8.7 pts to 40.1 in April, matching the message of the four regional Fed surveys released earlier this month: the headline index, orders and production were all much less negative in April, consistent with a slower pace of decline in activity, but the jobs measure only marginally improved.
US personal income and spending data for March were consistent with the quarterly totals published in yesterday's GDP report. One point to note is that the 2.2% quarterly growth rate in Q1 consumer spending was mainly due to a spike in January though growth since then has been subdued. Recent tax cuts will boost incomes in Q2 but the weaker labour market will clearly be an offsetting constraint.
Japanese industrial production up 1.6%. Continuing the theme, Japan's industrial sector also produced a better than expected March result, production rising 1.6% in the month, 'double' the 0.8% rise consensus was looking for.
The Euroland flash estimate of the annual CPI was steady at 0.6% yr in April, but should resume its decline towards 0% yr later in Q2. Germany's labour market downturn continued this month, with another 58k unemployed. Unemployment continued to rise steadily to 8.3%, from its 7.6% low point in late 2008, and last month, Euroland unemployment continued its upswing, reaching 8.9% from its low of 7.2% in early 2008.
UK consumer confidence posted a further gain in April, though being surveyed between 3-19 April, the slump in Q1 GDP growth, the huge budget deficits announced in the Budget, and swine flu would all be factors that the occurred too late to impact on respondents' moods. House prices only partially reversed their March gain in April, falling 0.4%.
The residual effects of yesterday's very dovish RBNZ package should maintain downward pressure on the NZD today. For technicians, an hourly head-and-shoulders has developed during the past 24 hours, and a break of the 0.5640 neckline is imminent, pointing to 0.5550.
Country Release Last Forecast
Aus Apr AiG PMI 33.4 â€“
US Apr UoM Consumer Sentiment (F) 61.9a 61.9
Apr ISM Manufacturing 36.3 38.5
Mar Factory Orders 1.8% flat
Apr Auto Sales, mn 9.9 9.5
Jpn Mar Jobless Rate 4.4% 4.5%
Mar Household Spending %yr â€“3.5% â€“2.7%
Apr Tokyo CPI Ex-Fresh Food 0.4% 0.2%
Mar National CPI %yr â€“0.1% â€“0.3%
Apr Vehicle Sales %yr â€“31.5% â€“
UK Apr House Prices %yr â€“17.5%
Mar Net Consumer Credit Â£bn â€“0.2 0.1
Mar Net Mortgage Lending Â£bn 1.5 1.6
Apr PMI Factory 39.1 40.0
Imre Speizer, Senior Market Strategist, NZ, Ph: (04) 470 8266
With contributions from Westpac Economics
Latest Research Papers/Publications
â€¢ NZ Q1 labour market preview (30 April)
â€¢ RBNZ OCR Review (30 April)
â€¢ NZ Weekly Forex Outlook (27 April)
These papers/publications are available on Online Research on Westpac
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