Monday March 22, 2010 - 19:28:20 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report
Morning Report Tuesday 23 March 2010
News and views
Modest gains in US equities and a decline in the US dollar suggested better risk sentiment, although other asset classes didn't exactly follow suit. The S&P500 gapped lower at the open, but buying of drugmakers, who would likely benefit from yesterday's legislation which extends healthcare to currently uninsured Americans, quickly lifted the index to 0.4% currently. The healthcare sector (more than 20% of the S&P500 index) rose over 1%. Earlier, Bombay's index closed down 1.0% following their rate hike, and Athens closed 1.9% lower on continuing aid concerns, the Eurostoxx 50 down 0.3%. Commodities were mixed, oil +0.4% and copper +0.2%, but gold -0.9%, and the CRB 0.2% lower. US 10yr notes shed 3bp, the anti-inflation measures of China and India cited.
The US dollar is slightly weaker, earlier gaining to 81.08 before US equities started rallying, currently around 80.60. EUR initially made a post-March low of 1.3464, not helped by German Chancellor Merkel's comments investors should not expect this week's EU summit to agree on any aid package for Greece, but rebounded with US equities to 1.3568. The yen outperformed the majors, gaining to 89.83 against the dollar, year-end repatriation a possible source of strength.
AUD fell to an overnight low of 0.9085, turning with the other majors to reach 0.9176.
NZD underperformed the majors, falling to almost 0.7000 and rebounding to only 0.7060. AUD/NZD rose from 1.2910 to just above 1.3000.
US Chicago Fed national activity index down 0.6 pts in Feb. 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. It then recovered most of that decline in January, reflecting the improved data tone in that month, then fell back from -0.04 to -0.64 in Feb, when data was weather impacted and there was some loss of momentum in the underlying economy too.
More dissension in the Fed ranks? St Louis Fed president Bullard said that the FOMC's low rates for an "extended period" commitment "is putting us in a box... people are interpreting that as a date certain when we will raise rates". Bullard votes on the FOMC this year, so it will be interesting to see if he joins Kansas City's Hoenig in dissenting against the use of that language at the next FOMC meeting.
Euroland consumer confidence steady at -17 in March advance report, a little below recent readings around -16 but still well above the -34 low exactly a year ago.
AUD/USD and NZD/USD outlook next 24 hours: AUD should be bound by 0.9085 and 0.9200 for another session. NZD should be contained by 0.7000 and 0.7100.
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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