Thursday March 11, 2010 - 19:38:19 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report
Morning Report Friday 12 March 2010
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Risk markets took a breather last night. US equities fell at the open, but then rebounded, as they digested the earlier China inflation report which raised the prospect of tightening there, as well as the US trade report showing imports fell. The S&P500 is down 0.1% currently. European equities earlier also lost ground, the Eurostoxx down 0.5%. The CRB commodities index fell 0.5%, weakness mainly in the softs. US treasuries drifted a few bp higher until the 30yr auction result - well bid, given their yields were near a record wide spread to 2yr notes - after which the 10yr note fell 3bp for little net change.
The US dollar is a tad weaker, from around 80.50 at Sydney's close to 80.30 currently. EUR nudged higher from 1.3640 to 1.3680. GBP continued its bounce from its oversold state, from 1.4950 to 1.5050. USD/JPY ranged sideways around 90.50.
AUD spent the evening gyrating between 0.9110 and 0.9170 without direction.
NZD made another small leg down to 0.6964, and then returned to the magnetic 0.7000. AUD/NZD could not make a fresh high, 1.3100 overhead an obstacle.
US trade deficit narrows from $39.9bn to 37.3bn in Jan. This was narrower than expected, due to a small 0.3% fall in exports and a larger 1.7% imports decline, partly due to lower oil import volumes. January data can be pushed around by seasonal trade lulls and the weather, but as the data stand, the fact that the deficit also narrowed in real terms implies a better net export performance at the start of Q1 which could see GDP growth forecasts revised higher.
US initial jobless claims fall 6k to 462k, in the first week of March perhaps reflecting a further downward correction from prior higher levels following bad weather in February. Continuing claims rose 37k in the previous week but remain close to their cycle low. No fresh implications here for the US labour market outlook.
The second estimate of Japanese Q4 GDP was 1.0%qtr, 3.9%saar. That compares to a 1.1% gain in the preliminary estimate. Inventories sliced 0.2ppt off the original measure, flipping from +0.1ppt to -0.1ppt, while net exports were revised up 0.1ppt to +0.6.
Canadian trade surplus C$0.8bn in Jan, up from C$0.1bn in Dec, reflecting a 0.5% export gain (mainly industrial products) and a 10.7% fall in imports (mostly energy).
Canadian capacity utilisation rose from 68.7% to 70.9% in Q4, the second quarterly gain after a downtrend that began in 2006. Strong GDP growth at the end of last year drove the rise. In other news, new house prices rose 0.4% in Jan.
AUD/USD and NZD/USD outlook next 24 hours: AUD should remain locked inside 0.9110-0.9190, given the absence of leads from offshore last night. NZD will need a strong retail sales report this morning to break above 0.7100, otherwise 0.6950-0.7050 should contain.
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