Wednesday March 31, 2010 - 19:31:54 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report
Morning Report Thursday 1 April 2010
News and views
Month-end dynamics led to some divergent performances within asset classes. The US ADP payrolls report (a private survey ahead of the government release tomorrow) was weaker than expected and hurt US equities at the open. The S&P500 has recovered to +0.1% currently. Commodities are broadly unchanged, although oil (+1.5% to a post-Jan high) and gold (+1.0%) outperformed. US 10yr treasuries shed 3bp on the weak ADP data. Fed-speak from governors Duke and Lockhart, the latter saying ending the MBS purchase program should have little effect, the Fed is watching Greece, and accommodative policy reversal would be premature.
The US dollar index fell from 81.60 to 80.90. EUR rose without missing a beat from 1.3380 to 1.3550 where it has paused. Month-end influences were cited, and the consensus beating Eurozone CPI won't have hurt either. The downgrade of five Greek banks by Moody's had little effect. The CHF did even better, gaining 1.8% to 1.0490, a post-Jan low. The dollar held its gains against the yen, around 93.50.
AUD fared relatively poorly in the wake of the weak retail sales and building data, and was stung by the ADP report, slipping to 0.9131 before recovering to 0.9180.
NZD was lacklustre, taking a brief foray to 0.7070 but unchanged at 0.7100. AUD/NZD made a reversal during the past 24hrs, down to 1.2880 but has recovered to 1.2920.
US ADP private payrolls fall 23k in Mar, its smallest decline since this jobs market indicator first turned negative in February 2008. As a stand alone statistic, that confirms that the US jobs story has improved significantly since the start of this year, but it does not tell us much about the likely outcome of Friday's March non-farm payrolls report, based on past experience.
US Chicago factory PMI fell from 62.6 to 58.8 in Mar, pretty much in line with Westpac's bottom of the range forecast. This outcome maintains the tendency of the Chicago index to occasionally move in the opposite direction to the prevailing direction of most other regional (and national) business surveys. The detail within the report was still solid, though production and orders were lower than in February and the employment index only edged marginally higher.
US factory goods orders up 0.6%, their sixth straight gain in February; January's rise was revised even stronger and February's durables gain was revised up by 0.4 ppts. The non-durable orders gain of 0.3% in February was weighed down by lower energy prices; it rose 0.9% ex petroleum. Factory inventories posted decent back to back gains in both Jan-Feb. All positive news for the US industrial sector, except for a small decline in shipments.
Euroland inflation jumped sharply to 1.5% yr in March, its highest since 1.6% yr in late 2008. German unemployment fell 31k in March and the previously reported gains in Jan-Feb were revised to small losses. Note however that government programs including Kurzarbeit (short working) mean that the normal relationship between the unemployment data (positive) and the economy (weak) has broken down. Meanwhile, back in February, the Euroland jobless rate hit a new cycle high of 10.0%, up from 7.2% two years earlier.
UK GfK consumer confidence falls from -14 to -15 in Mar. Modest slippage, though an uptrend is still in place relative to the end of 2009.
Canadian GDP rose 0.6% in Jan, its strongest of five consecutive monthly gains (and indeed the fastest monthly rise for 3 years). The increase was led by factories, wholesaling and construction.
AUD/USD and NZD/USD outlook next 24 hours: FX and rates markets will be trade in some limited form during the Easter Friday and Monday holidays, but volatile price action amid low volume is likely. Friday's US payroll report is the main known event risk, and we will be interested in the US dollar's reaction - pro-risk or safe-haven. During today's domestic sessions, AUD should remain within 0.9130 and 0.9220, while NZD's expected range is 0.7070 and 0.7130.
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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