Monday December 14, 2009 - 19:25:51 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report (Westpac)
Morning Report Tuesday 15 December 2009
News and views
Risk appetite improved slightly, global investors taking heart from news that the Government of Abu Dhabi would provide financial assistance to the Dubai World entity which had earlier credit defaulted. The news was released late Sydney time, and boosted asset markets globally, but depressed the US dollar. Most Asian, European, and US bourses gained, the S&P500 up 0.6% currently. Also helping US equities was news of Exxon Mobil buying XTO Energy, the largest acquisition of an energy company since 2006. Citigroup's stock fell 5.1% after it said it would repay its bailout money by raising equity and debt, raising dilution fears, but the banking and finance sectors still gained overall. The weaker dollar helped copper (+0.8%) and gold (+0.6%), but oil is unchanged. US treasuries are little changed apart from the front of the curve, 2yr notes 4bp higher. Fed funds futures now imply a 54% chance of a mid-year Fed hike, up from 39% a month ago.
The US dollar is slightly weaker, consolidating near its one-month high. The Dubai news pushed EUR from 1.4620 to 1.4680, but the effect faded after a few hours, and it's back to 1.4650. The weaker industrial production report was close to estimates. JPY consolidated between 88.40 and 88.60.
AUD bounced from 0.9060 to 0.9120 initially on the Dubai news, and made another leg higher in NY to 0.9170, near the top of the past week's 0.9000 to 0-.9200 range.
NZD bounced from 0.7210 to 0.7300 resistance, and is also neat the top of the recent range. AUD/NZD ground slightly higher during London/NY, from 1.2520 to 1.2580.
No US data to report.
Japanese Q4 Tankan survey: a lighter shade of black. The headline large manufacturers conditions measure came in at -24 from -33 in Q3. That compares to our forecast of -25; the market at -27; and the expectations measure in the prior survey of -21. Large non-manufacturing firms came in at -22 from -24 in Q3, well below the survey expectation of -17. Small non-manufacturing firms reported that conditions improved by 4pts to -35. The overall story is of an economy in recession, struggling with extensive slack and a paucity of endogenous opportunity.
Euroland industrial production fell 0.6% in Oct, its first fall in six months. Consumer durable production was down 1.4% on top of a 5.1% drop in September, probably in part driven by slower auto production as the impact of car scrappage schemes around the world fades.
UK house prices down 2.2% in Dec, following a 1.6% drop in Nov. Prices are still up in annual terms, by 1.7% yr, on this Rightmove index of real estate agent asking prices, because prices tend to fall at the end of each year (data not seasonally adjusted).
Canadian capacity use 67.5% in Q3. CapU fell for the tenth straight quarter in Q3 although the decline was only modest, from 67.7% to 67.5%, reflecting the modest growth in GDP last quarter.
AUD/USD and NZD/USD outlook today: AUD is still contained by resistance at 0.9200, range trading to 0.9050 the most likely outcome today, barring surprises from the RBA minutes. NZD should be repelled by 0.7300 overhead, and slowly move back towards 0.7200. NZ's half-year fiscal report should project lower funding requirements, thanks to the improving economy, but not until 2011.
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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