Thursday March 25, 2010 - 19:41:57 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report
Morning Report Friday 26 March 2010
News and views
A slightly more positive atmosphere prevailed until an hour ago, disturbed by ECB's Trichet saying IMF aid for Greece is "very, very bad", and another poor US treasury auction. Earlier, supportive events included friendlier Greek aid talk (a joint EU-IMF outcome, pushed by Merkel and Sarkozy, got some airplay), an improvement in US jobless claims, and Dubai's offer of $9.5b to help repay creditors. The Fed's Bernanke spoke, but added nothing new to the text previously released. There were reports the US Government is looking to sell its stake in Citigroup, thus allowing the bank to act more competitively. European equities fared well, the Eurostoxx closing up 1.5%, and the S&P500 is up 0.7% currently. Commodities remained mixed, the CRB index down 0.6%, key industrials little changed, but platinum up 1.6%. US 10yr treasuries pushed 7bp higher in yield to a post-June high of 3.92, the 7yr auction result poor at 4bp above market and timid bidding volume. US swap spreads stabilised.
The US dollar made a fresh post-May high, at 82.20. The EUR recovered to 1.3387 until the Trichet comments saw it pushed down to a fresh year low of 1.3279. The yen weakened further, from 92.00 to 92.96.
AUD drifted up to 0.9141 and then followed EUR down to 0.9083.
NZD performed slightly better, rising to just over 0.7100 before retreating to 0.7040. AUD/NZD lost more ground to 1.2858, recovering slightly to 1.2900.
Fed chair Bernanke testimony and other Fedspeak. The Fed chairman tabled his exit strategy text from Feb 10 (which was published then although the hearing was cancelled because of snow), but only summarized key points from that text in his rescheduled testimony, as well as providing an update on developments since then such as the discount rate rise later in February. Also, Cleveland Fed president Pianalto reiterated the exceptionally low rates for an extended period mantra (Bernanke explained that "extended period" was not a fixed time but depended on how the economy evolved); while outgoing Fed vice chair Kohn said he expected the Fed would tighten before any inflationary surge emerged.
US initial jobless claims fell 14k to 442k in the week after the March payrolls survey week, while in the previous week continuing claims fell 54k to 4.648k (though levels were lifted due to annual benchmarking revisions). Meanwhile the Kansas City Fed production index eased from 19 to 18 in March, but the jobs index rose from -4 to 3.
Euroland money supply M3 annual growth decelerated from 0.1% to -0.4% yr in Feb, and loans to the private sector fell at the same -0.4% yr pace. These weak numbers support the ECB's firmly on hold low interest rate stance.
UK retail sales jumped 2.1% in Feb (including fuel), but the Jan fall due to bad weather and the VAT hike was revised from -1.8% to -3.0%, so the two months together still saw the level of sales down compared to the end of 2009.
AUD/USD and NZD/USD outlook next 24 hours: AUD continues to look toppish, today's expected range of 0.9060-0.9140 vulnerable lower. NZD remains stuck inside 0.7000-0.7100, but we favour an eventual break lower.
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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