Sunday January 24, 2010 - 20:00:48 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report
Morning Report Monday 24 January 2010
News and views
The ramifications of President Obama's plan (announced Thursday) to curtail bank risk-taking were still being felt by US markets when another jolt to confidence was delivered during Friday's session. Ben Bernanke's nomination for a second term as the Fed Chairman is no longer a sure bet, after two Democrats withheld their support, adding uncertainty to the markets, and raising the spectre of the politicisation of the central bank. Earlier, influential analyst Meredith Whitney predicted the Obama plan would probably be approved, and could significantly reduce banks' trading profits., and Google's Q4 earnings missed estimates, adding to the bearish tone. The S&P500 closed down 2.2%, sustaining the previous day's break below the important post-March trend support line, as well as forming a bearish outside-down week, increasing the odds of lower levels ahead. The main equity indices in Europe and Asia also recorded losses. Commodities were generally weaker, although copper gained 1.6% on lower-than-expected Shanghai inventories. Oil lost 2.0%, silver lost 2.1%, and gold was unchanged. The US treasuries curve steepened, 2yr notes shedding 4bp and 10yr notes adding 2bp.
The US dollar is slightly higher from Sydney. The EUR was choppy between 1.4090 and 1.4180, ending at 1.4140. Stronger European industrial orders and a bond issue by Greece (implying investor demand) were supportive. GBP underperformed among the majors, falling from above 1.6285 to below 1.6100, partly due to a weak UK retail sales report. Risk aversion benefited the yen, gaining from 90.50 to 89.80 against the dollar.
AUD bounced a cent during early London to 0.9093 but then fell back to the week's 0.9000 low area.
NZD also bounced early, to 0.7177, then falling to the 0.7100 area. AUD/NZD peaked at 1.2723 late London, slipping into the high 1.26's in NY.
No US data to report. But speculation that Fed chair Bernanke may not garner sufficient support in the full Senate vote on his reappointment, due in the next week or so, is building - this will be a story to watch in coming days.
European industrial orders jump 1.6% in Nov, stronger than expected but still not fully reversing the revised 1.9% Oct fall. So after rising strongly in Q2 and Q3, thus far the orders trend in Q4 is barely flat.
UK retail sales volumes rise just 0.3% in Dec. This was much weaker than expected, given the imminent VAT hike on January, stronger confidence heading into Christmas, and retailer reports suggesting sales were up strongly. This result will see some analysts revise their Q4 GDP growth forecasts lower, though we remain comfortable with our below consensus 0.2% forecast (data due 26/1).
Canadian retail sales fall 0.3% in Nov. Falling auto and clothing sales more than offset a price driven spike in gasoline sales.
AUD/USD and NZD/USD outlook today: Last week's sell-off neutralised AUD's elevated sentiment indicators, but the risk is now for momentum to push the readings into extreme negative territory before 2009's advance can continue. A risk averse tone today is likely, capped by 0.9100. NZD should be capped at 0.7180 today, in a quiet session given the Wellington holiday.
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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