Thursday February 18, 2010 - 19:19:29 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
Another mixed bag of economic data from the US produced some inter-report volatility, but kept US equities around the previous day's level, the S&P500 currently up 0.1%. A bounce in the PPI was offset by an ugly jobless claims report, pushing equities lower, but the stronger Philadelphia Fed factory survey later restored risk appetite. Oil (+1.0%) and copper (+1.3%) responded more positively to the survey data. US treasuries were also volatile on the data, but put a positive spin on it, the 10yr gaining 7bp in yield and the 2-10yr curve steepening by 3bp. Next week's auctions will offer $180b, around expectations.
The US dollar held near the recent high around 80.60, notwithstanding a brief dip on the jobless data. EUR was soft at the European open but bounced off the week's low of 1.3540 as rumours of a large sovereign trade circulated, reaching 1.3650 before settling just under 1.3600. Eurozone consumer confidence fell slightly. GBP bounced off 1.5560 support twice, settling at 1.5600. UK reports on money supply growth, mortgage lending, and government borrowing were not encouraging.
AUD rose with the EUR from 0.8940 to 0.9015 before retreating under 0.9000.
NZD made a 0.6985 low early Europe, followed the other majors up to 0.7053, and is currently at 0.7040. AUD/NZD continued the February rally to make a fresh 2010 high of 1.2816 before slipping to 1.2880.
US Philly Fed headline bounced from 15 to 18 in Feb, just shy of Westpac's 20 forecast but still comfortably within the 10-23 range of the past six months, which is indicative of solid ongoing industrial activity in the northeast. The latest report included much stronger readings for orders and shipments, further improvement in jobs and a stronger inventories reading.
US PPI jumped 1.4% in Jan, lifted by energy prices (gasoline up 11.5%) and a 1.9% bounce in light truck prices, which, despite a 0.5% fall in auto prices, contributed to an above trend 0.3% rise in the core PPI.
US leading index posted its tenth consecutive monthly gain, although unlike in December when all ten index components were positive, in January jobless claims, orders, building permits and money supply were negative factors. Also, the January gain was the smallest of the latest upswing, up just 0.3%.
US initial jobless claims jumped 31k to 473k last week, with no special factors cited by the Labor Dept. It may be that snow last week caused higher than usual layoffs. Last week was the February payrolls survey week, so this result suggests that a payrolls gain (outside of Census hiring) might be hard to achieve.
BoJ meeting: The Bank of Japan refrained from expanding its lending and asset-purchase programs, preserving policy ammunition in case the economic recovery falters or the government increases pressure for more action to beat deflation. The policy board kept the loan facility for commercial banks and monthly purchases of government bonds unchanged. The benchmark interest rate remains at 0.1%. The policy board said the economy is "picking up," keeping its assessment of the economy unchanged. "There is not yet sufficient momentum to support a self-sustaining recovery," the statement said. The BoJ reiterated that beating deflation is a "critical challenge" for the economy and the bank will "aim to maintain the extremely accommodative financial environment."
Euroland consumer confidence falls from -16 to -17 in Feb, its first fall since it began recovering in April last year.
UK public sector net borrowing of GBP4.3bn in Jan represents the first Jan budget deficit since current records began in 1993. January is usually the peak month for tax receipts. These numbers are worrying and hammer home the need for substantial UK fiscal tightening from the incoming government after the elections due no later than June 3. Other data included decelerating M4 money supply growth at 5.1% yr in Jan, and weaker major bank mortgage lending.
Canadian headline annual CPI jumped from 1.3% to 1.9% yr in Jan, largely due to base effects, which also helped lift the core rate back to the 1-3% Bank of Canada target midpoint for the first time since May last year.
AUD/USD and NZD/USD outlook next 24 hours: AUD looks rangebound today between 0.8940 and 0.9040 with little offshore guidance. NZD is similarly locked inside 0.6990-0.7080, awaiting direction.
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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