Tuesday December 8, 2009 - 19:54:07 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report
Morning Report 9 December 2009
News and views
Risk markets were again lower, last nights losses attributed to mainly credit-related events. Fitch downgraded Greece from AAA- to BBB+ with a negative outlook, citing fiscal concerns. In more Dubai-related news, an analyst reported more of Dubai's state-run companies could have debt problems, with around $47b at risk of default. Finally, Moody's commented on the US and UK's deteriorating fiscal positions and implications for their Aaa ratings. Asian bourse closed modestly lower, the major Europeans worse off at 1-2% down, and the S&P500 is at -0.8%. The correlations with other asset classes were as expected, commodities mostly lower (oil -1.0%, copper -1.2%, gold -1.1%, silver -2.0%). US treasury yields were lower, 10yrs down 5bp, and the curve around 1bp flatter. The 3yr auction was a success, good foreign interest in the short end of the curve reported. The 10yr and 30yr auctions this week will be keenly watched for long-end appetite.
The US dollar is around 0.6% higher and testing minor resistance at 76.20. EUR has clearly broken below multi-month trend supports, the credit events referred to above, as well as weak German industrial production data and Moody's negative review of German bank WestLB conspiring to drag it from 1.4850 to 1.4700. GBP fell two cents to 1.6250, also hurt by weaker IP data. USD/JPY slipped further to 88.20. CAD underperformed, weakening from 1.0500 to 1.0650, its central bank maintaining its dovish "mid-2010" stance.
AUD fell from 0.9150 to test 0.9050 support, although a brief pop higher was seen after RBA Governor Steven spoke last night of the new "neutral" rate being higher.
NZD did similarly, falling from around 0.7160 to test 0.7080 support. AUD/NZD continued to consolidate just under 1.2800.
US confidence surveys were a touch softer for December. The IBD/TIPP economic optimism index fell 1.1 points to 46.8, while the NFIB small business optimism survey fell 0.7 points to 88.3, and has effectively been stalled since May.
German industrial production fell 1.8% in October, weaker than market forecasts but consistent with the slump in orders reported earlier this week. Monthly figures are volatile, and this followed a 3.1% rise in September.
A similar story in the UK, with industrial production flat in October following a revised 1.3% rise in September.
The Bank of Canada left its overnight rate unchanged at 0.25%, and maintained the commitment to keep it there until mid-2010. The outlook for growth and inflation was similar to the October report, with risks tilted slightly to the downside. The BoC slightly softened their concerns about the strong Canadian dollar, noting that "persistent strength ... could act as a significant further drag on growth", rather than suggesting that it would "more than fully offset the favourable developments" in recent months.
Canada housing starts rose 0.7% in November, with single starts rising 3.4% and the volatile apartments component dipping 1.7% after a 13.6% jump in October.
AUD/USD and NZD/USD outlook today: Both currencies are testing key support levels as we write, and any downward break this morning would cast a bearish pall on the day and beyond. For AUD, watch 0.9050, for NZD 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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