Monday February 22, 2010 - 19:15:37 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report
Morning Report Tuesday 23 February 2010
News and views
US equities stalled at recent highs, with no major events to stimulate a move in either direction. The Dallas Fed factory survey reversed its upward trend, and San Francisco Fed president Yellen provided a dovish assessment of the US economy, helping to check the markets. Commodities were subdued, the CRB composite index down 0.3%. Oil gained 0.2%, gold lost 0.3%, but copper fell 1.5% after a report showed production outpaced demand in November. The US treasury curve steepened. The 2yr 3bp lower, 10yr 2bp higher, and the 30yr +3bp. The 30yr inflation-linked bond auction (first since 2001) saw implied inflation fall 2bp to 2.44%.
The US dollar sat in a tight sideways range above 80.40. The EUR slipped further, from 1.3630 to 1.3574. EU spokesman Altafaj said there is no plan to bail out Greece, and separately, media reports said Greece's use of swaps in its fiscal reports would be investigated by the EU accounting watchdog Eurostat. USD/JPY slipped from 91.60 to 91.00.
AUD ranged sideways between 0.8975 and 0.9020, another analyst adding to the view the RBA would hike next week.
NZD also ranged, 0.6995 to 0.7035. AUD/NZD consolidated below its multi-month high, between 1.2820 and 1.2840.
Janet Yellen on the US economy. The San Francisco Fed president often seems to have her finger on the pulse of the latest thinking at the top of the Fed. So her latest dovish assessment of US economy and policy outlook in a speech she gave in San Diego today might mirror some of the sentiments that Fed chair Ben Bernanke will express in his semi-annual testimony on Wednesday. Key quotes from Ms Yellen include "core inflation may decline in 2010 and 2011... economic slack is pushing inflation down... economy to operate well below potential for years... housing market could weaken again... consumer mindset fragile... this is not the time to remove monetary stimulus".
US Dallas Fed factory index falls from 10 to -0.1 in Feb. This regional factory index was one of the last to turn positive just three months ago (Richmond rose above 0 back in May, six months prior). However it rose every single month from its nadir at -56.5 a year earlier in February 2009 until January, in contrast to the other more volatile regional surveys from the district Fed offices. So the latest fall is perhaps more significant than would be a similar decline in, say, the NY Fed index. The Feb detail showed production down 5 pts to 2, orders dropping from 27 to -6, shipments down from 11 to -1 and jobs little changed around -5.
US Chicago Fed national activity index rises from -0.58 to 0.02 in Jan. The CFNAI compiles 80 or so data releases each month into one indicator of national economic performance. It turned positive in November last year for the first time since 2007, but was quite a bit weaker in December, no surprise really given housing, jobs, manufacturing and other end year data. But it recovered most of that decline in January, reflecting the improved data tone of late.
AUD/USD and NZD/USD outlook next 24 hours: AUD has been well contained by 0.9040 resistance, this level pivotal for the week-ahead's direction. NZD's pivotal level is further away at 0.7080, a range today of 0.6990-0.7040 likely, barring a sock from today's inflation expectations report.
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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