Monday November 30, 2009 - 19:45:44 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report
Morning Report Tuesday 1 December 2009
News and views
Risk markets stabilised near the bearish end of their recent ranges. Concern over Dubai World's contagion effect eased with the calming noises from regulators, rating agencies, and revelations of insignificant exposures by foreign banks, reducing credit spreads slightly. US data was also supportive, the Chicago PMI stronger than expected. Asian equities gained 2-3%, but Europe and the US were spooked after the Fed's announcement they would test the reverse repo process, a method draining cash from the system, in readiness for the future. Bearish tidings also came from lower US Thanksgiving sales compared to last year, hurting US retailing stocks. Commodities were mixed with only minor moves, apart from copper's +1.7%. US treasuries were also subdued, 10yr notes trading sideways around 3.22.
After making an intraday low around the Sydney close, the US dollar recovered slightly. EUR spent the session drifting lower from 1.5080 to 1.4980. USD/JPY stabilised above 86.00, opposing factors being the month-end fix (yen buying) and official comments that measures to stop the yen's rise had been agreed.
AUD had another peek above 0.9190 just after its close, and then pulled back to consolidate between 0.9120 and 0.9160. Journalist Terry McCrann was confident of a 25bp RBA hike today, impacting the AU interest rate markets.
NZD peaked at the close at 0.7220 and then slid almost a cent. AUD/NZD ground from the low 1.27's to just above 1.2800.
US Chicago PMI rose from 54.2 to 56.1 in November. This region is relatively heavily weighted towards auto production, and the strong bounce in the last two months suggests that the auto sector has found some life outside of the 'cash for clunkers' scheme (the new orders component was above 60 for the second straight month). Employment remains the laggard, rising to 41.9 in November but still suggesting a steady pace of job shedding.
Other US regional surveys also pointed to growth. The Milwaukee PMI bounced to 57 in November after last month's drop to 50, and the Dallas Fed manufacturing index rose to +0.3%, the first positive read in two years.
Japanese industrial production edges up just 0.5% in October. The result was disappointing with the market looking for a 2.5% gain to build on Sep's 2.1% rise. The apparent fade-out is more bad news for an economy already struggling with a deep contraction, an overhang of capacity and serious deflationary problems. Other data was somewhat less bleak though with labour earnings posting a less marked decline than feared (-1.7% in Oct vs the market's forecast of -1.9%), and housing starts down 'only' 27.1% (vs -37% in Sep). Construction orders were still off a massive 40%yr though. It seems the buffer from public engineering works was not enough in October.
Eurozone CPI flash estimate rose 0.6% yr in November. Rising oil prices and favourable base effects saw annual inflation turn positive again after five months of decline.
UK mortgage approvals reached 57.3k in October, continuing its steady climb over the last year. However, while lending on houses grew by GBP0.9bn, net consumer credit fell by another GBP0.6bn, the fastest pace yet in this cycle, as people repaid other forms of debt.
Canada GDP rose 0.4% in the September month, giving a total gain of 0.1% for the quarter. While the result was short of market and BoC forecasts, the details were encouraging, with strong gains in consumption (led by cars), capital investment and imports, offset by soft export growth.
AUD/USD and NZD/USD outlook today: The RBA meeting today poses large event risk to a daily outlook. Westpac's official call is for a 25bp hike. AUD remains under the multi-month trend support which was broken a couple of days ago and needs to break above 0.9200 to get back on a bullish track. Support on the day is around 0.9100. NZD manages to stay above the key 0.7080, a break below being medium term bearish.
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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