Monday February 8, 2010 - 19:21:12 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report
Morning Report Tuesday 9 February 2010
News and views
In a fairly uneventful evening, most markets consolidated recent gains and losses. US equities are largely unchanged, the S&P500 up 0.1%, although the banks' sub-index is down 1.3%. US Treasury Secretary Geithner said in an interview the US is in no danger of losing its AAA sovereign credit rating, but equity investors remain concerned about southern European sovereign risks. The world's largest bond fund, PIMCO, said as much at a press conference yesterday, commenting on its reallocation of risk from Europe into Brazilian bonds and the CNY currency, while also expressing confidence in the US economy. Commodities partly recouped recent heavy losses as the US dollar slipped, oil up 0.7% on cold weather, copper up 1.8%, and cotton up 2.8%. US treasuries added a couple of bp across the curve ahead of another hefty auction week ($81b of 3yr, 10yr and 30yr bonds), safe haven demand slipping.
The US dollar index consolidated just under its recent high of 80.68, ranging between 80.10 and 80.50. The EUR fluctuated between 1.3640 and 1.3710, its oversold condition slowing further losses for now. USD/JPY ranged between 89.10 and 89.60.
AUD ranged between 0.8640 and 0.8710. Not market-moving but topical, influential journalist Terry McCrann cautioned yesterday's announced termination of the wholesale government guarantee facility could haunt in the event of another credit crunch.
NZD underperformed after spiking to 0.6920 early Europe, testing 0.6860 support several times. AUD/NZD rose from a 1.2570 overnight low to 1.2650.
No US data.
Japan's current account narrowed slightly in December. The seasonally adjusted balance came in at JPY1100bn in December against a JPY1305bn surplus in November. The raw data (the relevant measure for flows) also narrowed by JPY200bn or so. The income surplus explained much of the that, falling to JPY806bn from close to JPY1 trillion for most of the second half of the year. Also today, January bank lending fell to -1.5%yr from -1.0%yr in December.
Europe Sentix investor sentiment fell from -3.7 to -8.2 in February, the first drop in seven months. A drop of around 6% in European share markets and growing concerns about sovereign debt gave investors plenty to worry about in January.
Canada housing starts rose 5.8% in January, continuing their strong recovery from the April lows. Annual benchmark revisions also added around 7% to starts through the second half of 2009.
AUD/USD and NZD/USD outlook today: AUD should again hold above 0.8600 support, given its resilience since Friday night. NZD should hold above 0.6800. Today's NZ PM speech to Parliament may outline tax system changes which could have a NZD bearish tilt.
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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