Thursday December 10, 2009 - 18:36:43 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report
Morning Report Friday 11 December 2009
News and views
Overnight performance by asset class was mixed. US equities opened stronger on better data (trade balance rose and continuing jobless claims fell), the S&P500 currently up 0.6%, although banks remain in the red (-0.6%). The Eurostoxx closed up 1.1%, with the Greek index rebounding 5.2%. Commodities continue to struggle, oil slipping another 1% to just below $70, copper -1.1%. US 10yr treasuries are around 6bp higher in yield. The 30yr auction, like the 10yr one earlier this week, was not well bid, 4bp worse than expected, and with lower foreign participation. The Fed tested its reverse repo (draining cash from the banking system) process in a $225m three day transaction.
Currencies were mixed, the US dollar index little changed around this week's highs. EUR consolidated in a 1.4700-1.4760 range. CHF initially was sold to 1.0300 after the SNB said it would "act decisively to prevent any excessive appreciation in the Swiss franc", but recovered to range between 1.0240 and 1.0280. The SNB also spoke of withdrawing emergency stimulus measures (bond purchases). GBP ranged between 1.6210 and 1.6350, the BoE meeting producing no surprises (no additional QE).
Momentum from the earlier strong employment report helped AUD make an intraday high of 0.9190 before settling above 0.9150. Journalist McCrann's bullish commentary was also supportive.
NZD had its own momentum from the RBNZ's hawkish surprise, making a 0.7320 intraday high. AUD/NZD fell further after the Sydney close to a 1.2537 low.
US trade deficit narrowed to $32.9bn in October, from $35.7bn in September. Most of the decline came from a surprising drop in petroleum imports - seasonally adjusted volumes fell by 12%, and prices were recorded as being 1.1% lower, despite a 9% rise in crude oil prices over the month. Trade in autos and parts was stronger on both sides of the ledger, reflecting the post-bankruptcy rebound by US carmakers.
US initial claims rose 17k to 474k in the first week of December, reversing some of the sharp falls through November. The weekly claims figures tend to be more volatile around holiday week, of which there are plenty between now and February. Continuing claims in the previous week fell sharply to 5.16m, maintaining the downward trend that has been in place since July. It's unclear how much of the drop in ongoing claims is due to workers becoming ineligible for time-limited unemployment insurance, but the recent extension to insurance for some workers may help to resolve the question in coming weeks.
Japanese machinery orders, -4.5%mth, -21%yr. Right on expectations, a relief after the downward revision to Q3 GDP.
The Bank of England's policy review was a non-event, with the repo rate held at 0.5% and the asset purchase target unchanged at GBP200bn. The BoE have said they will review the asset purchase program in February.
Canada posted a trade surplus of $0.4bn in October, against forecasts of a deficit. Exports rose 3.4%, mostly volume-driven, thanks to a second month of strong gains in shipments to the US.
AUD/USD and NZD/USD outlook today: Both currencies were subject to positive event shock yesterday, propelling them to the middle of their month-long ranges. AUD has minor resistance at 0.9200 and much stronger resistance at 0.9300. NZD should find 0.7300 sticky. Selling AUD/NZD on bounces is our preferred strategy.
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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