Wednesday December 23, 2009 - 20:40:52 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report
Morning Report Thursday 24 December 2009
News and views
The USD fell across the board with a larger than expected fall in new home sales spurring a bout of pre-Xmas profit taking. EUR/USD rose from near 1.4240 to session highs of 1.4367, halting a 6 consecutive day slide, after new home sales unexpectedly fell 11.3%. A downward revision to Michigan consumer sentiment for December (from 73.4 to 72.5) was another USD negative.
Thin trading conditions would have exacerbated the USD's fall. US 10 year yields fell 2bp, while crude oil prices rose more than $2 to fresh 2-week highs of $76.55. AUD was oddly a laggard today, rising 0.5% to reclaim the 88c handle in late offshore trade. The CAD and NZD by contrast by rose about 0.85% in offshore trade. GBP was the laggard however, unchanged on the day at 1.5960 thanks to the BoE minutes which showed a 9-0 unanimous vote to leave policy unchanged.
US new home sales plunged 11.3% in Nov, and Oct's gain was revised from 6% to 2%. Uncertainty about the tax credit for first home buyers (which has since been extended) may have been a factor at play - demonstrating how dependent the housing market recovery this year has been on government stimulus.
US core PCE deflator flat in Nov. This confirmed the benign underlying inflation picture painted by the CPI report earlier this month. The report also showed a 0.4% rise in personal income and a 0.5% gain in personal spending, both softer than earlier data on hours worked, earnings and retail sales had suggested would be the case. In other news, UoM consumer sentiment was revised down from 73.4 to 72.5 in the final Dec report.
Bank of England minutes show unanimous 9:0 vote to hold rates steady at 0.50% and leave the asset purchase program at GBP200bn, although the two committee members who had favoured different sized programs at the Nov meeting said a case could still be made for their previous positions.
Canadian GDP expanded 0.2% in Oct, a little softer than expected, constrained by a fall in mining output. Still, the economy is on track to post a second consecutive quarter of GDP growth in Q4.
AUD/USD and NZD/USD outlook today: With the holiday period now fully upon us, we would expect to see very subdued trading in AUD and NZD today. However, the failure for the NZD to move lower after the break of technical support at 0.7000/20 suggests a neutral stance is more appropriate at current levels. We also feel the outlook for the AUD is beginning to improve. Bulk commodity prices especially coal have been moving higher in recent weeks with export volumes holding up well too. This is something that is not reflected in the A$ price action right now.
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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