Thursday August 13, 2009 - 22:30:26 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report
Morning Report Friday 14 August 2009
News and views
Weak US data, better numbers in Europe and resilient US equities all left DXY somewhat softer in London/NY. EUR/USD found buyers in the European morning on a variety of factors, peaking at 1.4328 but struggled to extend gains in NY, spending most of its time in the high 1.42's. Much attention was paid to the upside surprises in German and French Q2 GDP, both rising 0.3%. USD/JPY was a simpler story, sinking from 96.25 to 95.60 on the weak US retail sales and jobless claims data then extended to 95.25 in late NY. AUD/USD rallied firmly in the London morning from the high 0.83's to an 0.8454 high before risk appetite was thumped on the dismal update on the US consumer, knocking AUD/USD back to around the figure. The Aussie probed to the 0.8370 area in the NY morning as US equities hit their intra-day lows (DJIA about -55pts).
But equity markets managed to spend most of the session above water despite the US data, SPX trading up 0.7% in its final hour, helping the likes of AUD and NZD. The NZD touched 0.6815 in the London morning, shed 40 pips on the retail sales release then spent much of its time chopping around 0.6780-0.6805. Risk appetite pushed the US 10 year Treasury yield up to 3.76% in London before Treasuries rallied back on the US data and indeed didn't look back en route to 3.60%. Comex copper was resilient in the face of the US data, gaining about 3% while NYMEX crude oil whipped around $70-72/bbl, lacking clear direction.
US retail sales fell -0.1% in June, weaker than the market expected. The "cash for clunkers" scheme boosted auto sales by 2.4%, but this appears to have constrained spending elsewhere by more than expected - after all, even with the cash handout, a car is still a major expense. Gasoline sales fell 2.4% on lower prices, while spending rose on healthcare (which tends to rise in a recession) and clothing.
US initial jobless claims ticked up slightly to 558k in the week to 7 August. However, continuing claims for the previous week were lower than expected at 6202k. The claims figures should stabilise from here, as the distortions relating to the timing of the annual auto sector shutdown drop out of the equation.
Eurozone GDP fell by just 0.1% in Q2, much better than the 0.5% drop the market was expecting. Of the largest economies, France and Germany both recorded growth of 0.3% for the quarter, while Italy contracted at a slower pace. The limited breakdown available so far suggests that consumption and net exports made positive contributions, while business investment remains the biggest drag on growth in the region.
We placed a lot of importance on the break-out through 0.66 last week. And we would place a lot of importance on the successful recovery from that level this week. This tells us that the medium term uptrend is still intact. We thus retain our upward bias on NZD/USD near term as global data momentum still remains favourable for commodity currencies in our view.
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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