Tuesday February 2, 2010 - 19:22:37 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report
Morning Report Wednesday 3 February 2010
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Risk appetite remained positive for a second consecutive day, negative news shocks absent. US equities gained throughout the session, led by homebuilders, with the second largest, DL Horton, posting its first profit since 2007. The Eurostoxx 50 closed up 1.4%, and the S&P500 is currently up 1.0%. Commodities had a strong day on the improved equities sentiment and weaker US dollar, the CRB index up 1.7%. Oil outperformed at +3.3%, while copper was subdued at +0.3%. US treasuries were unmoved by as-expected US home sales data, the 10yr yield stuck at 3.65%. Moody's said the US's Aaa credit rating remains stable, and Fitch upgraded Romania's credit rating outlook from negative to stable, after the IMF said it would allow a EUR 20b bailout loan for the country.
The US dollar again moved negatively with US equities, correcting its overbought condition of two days ago. The EUR rose from around 1.3920 post-Sydney, and is currently at a 24hr high of 1.3975. USD/JPY slipped from around 90.80 to 90.30.
AUD regained more than half of its RBA-induced 1-cent fall, bottoming around 0.8780 and currently at 0.8860.
NZD rose from around 0.7050 to the 0.7125 current level, the -1.6% milk powder auction result a few hours ago largely ignored. AUD/NZD fell slightly further after the Sydney close, to around 1.2420.
US pending sales of existing homes rise 1.0% in Dec. This followed the steep 16.4% plunge recorded in November, which illustrates the extent to which sales had been "pulled forward" by the tax credit for first home buyers. This was due to expire in November, but was subsequently extended till April and expanded to include existing home owners, so we may see another temporary surge in sales and related housing activity in coming months.
Japanese labour earnings cratered in December. Just when you thought it was safe to uncover your eyes and review the state of the Japanese economy, you get a piece of data like this. Earnings fell 6.1% from a year ago in December. That compares to a 2.4% decline in November and the cyclical low (revised) of -7.0%. So despite some tentative evidence of labour market stabilisation, earnings are still under attack.
Euroland producer prices rose 0.1% in Dec, pulling the annual pace of decline back to -2.9% yr from -4.4% yr.
German retail sales volumes rose 0.8% in Dec, but this followed a downwardly revised November outcome, from -1.1% to -1.7%, so the annual pace of decline remained weak at -2.5% yr. For Q4 as a whole, retail volumes were down 0.2%, compared to a 0.4% contraction in Q3. That leaves in pace a subdued consumer picture even though the German economy has emerged from recession.
UK construction PMI rises from 47.1 to 48.6 in Jan, its highest yet in the current upswing, but still consistent with a modest pace of contraction in the building sector at the start of this year.
AUD/USD and NZD/USD outlook today: Yesterday's negative RBA surprise interrupted the AUD's short-term corrective bounce, although it appears to have resumed progress during the past few hours, the immediate upside target being 0.8900. So too for the NZD, its immediate target being 0.7165.
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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