Thursday October 29, 2009 - 19:54:00 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report
Morning Report Friday 30 October 2009
News and views
After six down days in US equities, there was something to soothe the bulls in the guise of an upbeat US GDP report for Q3, the +3.5% headline growth rate beating +3.2% consensus and reinforcing market perceptions the recession ended in June. US official President Obama's chief economist, Christina Romer opined it marked the turn-around. Risky assets in the US and Europe rebounded, the S&P500 up 1.9% currently, and the VIX 10% lower. Copper (+3.1%) and crude oil (+3.5%) led a rally commodities, and along with gold (+1.8%) formed bullish key reversals. US 10yr notes were 12bp higher in yield from the Sydney close at one point, the renewed risk appetite dampening demand in the seven year auction. The bond session was also notable for marking an end to the Fed's $300 billion treasuries purchase program.
The US dollar index reversed the previous day's bullish price action, and that upward break can be labelled 'false' for now. EUR (key) reversed higher, from 1.4707 at Sydney's close to 1.4850, unfazed by ECB jawboning. JPY was hurt by the move back into risk, USD/JPY rising from 90.50 to 91.60.
AUD rose by 2.6% from Sydney's 0.8944 low to 0.9178.
NZD bounced from yesterday afternoon's low of 0.7163 to 0.7369. AUD/NZD consolidated its gains between 1.2450 and 1.2500, its break above a six-month long channel technically significant.
US advance GDP grew 3.5% annualised in Q3, slightly ahead of market forecasts. Consumer spending led the way, particularly spending on durable goods thanks to the 'cash for clunkers' scheme. A 2.3% rise in government spending also provided support. A slower pace of inventory rundown meant that a greater share of demand was met through new production - a positive sign, although the US I still far from seeing an outright rebuilding of the level of inventories.
US initial jobless claims fell 1k to 530k last week. The downtrend in claims appears to be intact, but it has stalled a little recently. In contrast, continuing claims fell sharply again, down 148k to 5797k, though we caution that a factor at play could be claimants running out of benefit and so dropping out of the count.
Japanese September industrial production rose 1.4%, a solid outcome. The official projections for the next two months envisage further growth in output. The inventory-to-shipments ratio fell again, and the index is now at 117.2, down from 158.5 in February.
Eurozone sentiment surveys were generally stronger in October, with the biggest improvement in industrial sentiment from -24 to -21. The overall economic sentiment indicator rose from 82.8 to 86.2, the highest since September last year.
German unemployment fell 26k in October against expectations of a 15k rise. However, the method of calculating this series was changed in May and is likely to distort the figures through to April next year. The unemployment rate actually fell slightly to 8.1%.
UK mortgage approvals rose to 56.2k in September, with previous months revised higher as well. This is the highest level since March 2008, though still less than half of the peak reached in 2006. Net mortgage lending rose by GBP0.9bn, though overall consumer credit fell again by GBP0.3bn as repayments exceeded new lending.
AUD/USD and NZD/USD outlook today: The previous day's bearish price action was largely reversed yesterday, suggesting the post-March uptrends are still alive. Accordingly, we'd revert back to a buy on dips strategy on the day, while reserving judgement about the longer-term outlooks. AUD may find minor support at 0.9100, the NZD at 0.7300.
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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