Sunday April 18, 2010 - 21:39:00 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report
Morning Report Monday 19 April 2010
News and views
A blow to confidence. The US SEC charged leading US investment bank Goldman Sachs with fraud during early US trading, hurting risk markets. The charge alleged it misstated and omitted facts when marketing subprime CDO's. Goldman's share price plunged 13%, the S&P financials lost 5.2%, and the S&P500 closed down 1.6%. Also hurting confidence was a surprise drop in US consumer confidence, countering the earlier release of stronger housing starts. The CRB commodities index fell 1.2%. Gold fell 1.9%, as the market learned a fund related to the Goldman charges was known to be bullish on the metal. Copper fell 2.4% and oil 2.7%. US 10yr notes shed 7bp in yield and the 2-10yr curve flattened 1bp.
The US dollar bounced on safe-haven appeal, from the 80.60 area to 80.90. EUR suffered only modest losses by the close of Friday, from 1.3530 to 1.3473 to 1.3500, but opens in NZ this morning down to 1.3460. GBP fell around a cent to close at 1.5363, the election race slipping from the conservatives. Risk-averse yen outperformed, and was the only major currency to gain on the day, from 93.10 to 91.90. Commodity currencies were the most heavily sold.
AUD peaked at 0.9334 shortly after the Sydney close, drifting lower until the Goldman news saw it fall to 0.9331. Friday's underperformer among the majors, it has traded as low as 0.9210 this morning.
NZD fell from 0.7138 to 0.7066. AUD/NZD is slightly lower at 1.3025.
US house starts up 1.6% in Mar but revisions make report much stronger. The annualised pace of starts was 625k, compared to our above consensus 621k forecast, and Feb was revised up from 575k to 616k (i.e. by 7.1%). So much of the weather impact on Feb was revised away with only the south recording a Feb starts decline, which was more than recovered in Mar. The permits strength in March, up 8% on top of a 2% Feb gain may reflect a scramble to take advantage of the tax credit which runs out this month.
US consumer sentiment falls from 73.6 to 69.5 in preliminary UoM survey for April. The decline was led by the outlook component, and contrasts with the rise in the IBD-TIPP economic optimism index, surveyed last week.
Canadian auto sales jump 8.1% in Feb, a little stronger than previous guidance from StatCan for a 7% rise. Guidance for March was for a 4% decline. In other news, wholesale sales rose 0.1% in Feb, their sixth consecutive monthly gain.
Euroland CPI revised down from 1.5% yr to 1.4% yr in March. The core CPI edged up from 0.9% yr to 1.0% yr, confirming that most of March's headline CPI jump was in energy-related components.
AUD/USD and NZD/USD outlook next 24 hours: Friday's risk-averse pall should keep the downunder bloc subdued today. AUD's support area today is 0.9200. NZD should be contained by 0.7050 and 0.7150.
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