Tuesday August 4, 2009 - 21:07:49 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report
Morning Report Wednesday 5 August 2009
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US equities took a breather last night, initially climbing modestly higher on the positive data, but falling on profit-taking near the close. The S&P500 is unchanged with an hour to go. Downward revisions to US personal income and subdued PCE inflation placed a brief cap on risk, but stronger pending home sales later revived investor appetite. Oil is largely unchanged, but metals recorded gains of 1% or more. US 10 year treasuries rallied by 4bp on the PCE data, then slipping by 14bp on the home sales report.
The US dollar spent the evening consolidating just above its recent low, making for lacklustre price action in most currencies. EUR formed a narrow 1.4370 to 1.4430 range near its recent high. Similarly, GBP was contained by 1.69 and 1.70. USD/JPY is unchanged around 95.30, masking a 1 cent dip at the London open. USD/CAD produced some excitement after Canada's finance minister spoke of dampening the currency's rise, pushing the pair a cent higher to 1.0765.
AUD's recent outperformance saw it hit by profit-taking after the Sydney close, falling from 0.8440 to 0.8385, before rebounding back during London's afternoon.
NZD was bound by 0.6647 and 0.6690,with and AUD/NZD ranged between 1.2590 and 1.2650.
US core PCE deflator 1.5% yr in June. The quarterly totals for spending, income and the deflators were published in last week's GDP report for Q2, so there was only limited new information in the June report, mostly related to back revisions. The steep fall in personal income reflected the one-off May social security payment dropping out of the numbers. The spending rise of 0.4% was consistent with retail and auto sales figures for the month. The core PCE deflator was revised down from 1.8% yr to 1.6% yr in May and eased slightly further in June, leaving in place a more pronounced downtrend than was previously the case.
US pending home sales up 3.6% in June. Pending home sales rose even more sharply than our above consensus 2% forecast, adding to the growing body of evidence pointing to a clear turning point in the US housing market, across sales, construction, sentiment and prices. June's gain was the fifth straight rise; all regions recorded increased sales.
Euroland producer prices kept falling in June, down 6.6% yr, maintaining the recent trend, although after July, base effects will start to push the annual PPI rate of change less negative.
UK construction PMI bounced sharply in July after June's temporary setback. While a stronger outcome, at 47.0 it still implies sectoral contraction, unlike the manufacturing PMI which rose above 50 and the services PMI which has been in expansion mode since May (July result due tonight).
Fonterra's milk powder auction results (just released) saw the average price 26% higher than last month, outpacing expectations, which is likely to be bullish for NZD today. A move towards 0.67 is expected, with 0.69 during coming weeks.
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 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. Â© 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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