Monday September 21, 2009 - 00:08:45 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report
Morning Report Monday 21 September 2009
News and views
Lacklustre Friday evening sessions in London and NY saw equities markets little changed, the S&P500 up 0.3%. Oil futures looked to the US dollar for direction and slipped 0.6%. Copper fell 3.8% on a continuing rise in inventories. US 10yr notes weakened by 10bp ahead of this week's record auction volume and Wednesday's FOMC meeting. Although there were no US economic releases, the weekly ECRI LEI index, an excellent lead indicator for both the economy and asset markets, posted a new high, but also exhibited waning momentum - an early warning signal the post-March rallies are now mature.
The US dollar posted a small correction of September's losses, but it is too early to tell if this will evolve into the grander correction some chartists have been waiting for. EUR fell to 1.4648 soon after Sydney closed, but rebounded to above 1.4700 for most of the NY session. The Euroland current account returned to surplus in July. GBP finished the week with an accelerated decline reaching 1.6231. UK government finances showed further deterioration. The yen was stable between 91.00 and 91.50.
AUD looked tired after its recent surge, and closed at 0.8670, near the 0.8654 bottom of Friday's range.
NZD was also looking for a rest, but 0.7076 limited the downside, and it closed around 0.7090. AUD/NZD remained locked in last week's 1.22-1.23 range.
No US data to report.
Euroland current account back in surplus. July saw a surplus of EUR6.6bn, the first since February last year.
German producer prices fall 6.9% yr in Aug. Base effects (last year's energy price falls dropping out of the calculation) have started to unwind the pace of decline of the PPI.
UK public finances continue to deteriorate. The cumulative public sector net credit requirement for FY2009/10 as at August was GBP57bn, compared to less than GBP9bn a year earlier! In other news, money supply M4 growth slowed from 14.4% yr to 12.6% yr, though the breakdown is not yet available so we can't draw conclusions about any impact of the Bank of England's quantitative easing program.
Canadian wholesale sales jump 2.8% in July. The biggest jump since 2006 was due to autos, reflecting increased activity in the sector as GM and Chrysler emerged from bankruptcy.
AUD/USD and NZD/USD outlook today: The AUD and NZD rallies since March remain intact, but there are signs of maturity. Accordingly, our short-term recommendation is to cautiously buy on dips. For AUD/USD look to buy at 0.8660 with a close stop, while for NZD/USD look for 0.7080.
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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