Monday November 23, 2009 - 19:10:27 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report
Report Tuesday 24 November 2009
News and views
The risk trade was
revived last night. Strong US
existing home sales gave US investors something to support their view the
market will keep rising, and the S&P500 is currently up 1.3% after gapping
higher at the open. In addition, the Chicago Fed's president told the FT "US rates may stay near zero until late 2010,
perhaps 2011", supporting the session's risk sentiment. Most commodities
rallied, with gold standing out (+1.5%) at its new high of $1174. US treasuries were sold in line with better risk
appetite, and the two year auction didn't help either - a lower bid-cover ratio
of 3.2 and a yield of 0.802% exceeding the expected 0.786% indicating weaker
demand. In credit news, Fitch downgraded Mexico from BBB+ to BBB, citing fiscal weaknesses and
falling oil production.
Currencies were higher
against the US dollar in line with the positive tone to risk assets. EUR
gained throughout the session to 1.5000, currently resting just below. ECB's
Trichet spoke but said nothing new.
GBP rallied to 1.6650 but slipped to 1.6590 after
the NY open. CAD (+1%) outperformed the majors, reaching the 1.0550 area,
assisted by a strong retail sales report. A wild MXN saw a 2% range around the
Fitch news, but interestingly is slightly stronger overall. The dollar did gain
against one currency, the yen, from 88.80 to 89.20 in a thin Japanese
AUD moved from the 0.9200 area at the Sydney close up to almost 0.9280, before taking a rest
NZD moved from 0.7260 to above 0.7360, and formed a
bullish outside day. AUD/NZD moved lower after almost reaching 1.2700
yesterday, spending much time in the 1.2600 region overnight.
US existing home sale completions surged 10.1% in
Oct on top of Sep's 8.8% jump.
That took sales to their highest since February 2007. These are sales that
would have been agreed back in Q3, when the twin incentives of turning rather
than free-falling prices and the tax credit for first home buyers were clearly
driving activity. It remains to be seen whether the weakness in more recent
housing indicators is also reflected in upcoming existing home sales figures.
Pending home sales data due Dec 1 for Oct will provide an early clue.
US Chicago Fed national activity index slipped to -1.08 in
Oct from -1.01 (and Sep was
revised down from -0.81). This index is derived from 85 previously released
economic statistics for October, and reflects the recent softer data tone.
Fedspeak: St Louis Fed President James Bullard said the
central bank should keep its asset purchase programs ticking over "at a
very low level" beyond March next year instead of shutting them down
completely. He argued this would give the Fed more flexibility to respond to
future news, for example "if the economy came in very weak... in
advance further in Nov. The
advance factory PMI rose from 50.7 to 51.0, while the services PMI was up from
52.6 to 53.2. That lifted the composite PMI from 53.0 to 53.7, its highest
since November 2007, two years ago.
sales rise 1.0% in Sep. New car
sales rose 0.6%, ex auto sales were up 1.1%, including a 1.1% rise in gasoline
AUD/USD and NZD/USD
outlook today: The AUD should
range between 0.9120 and 0.9280, while NZD should be contained by 0.7200 and
0.7390. We will watch for any follow through in last night's broad move higher.
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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
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