Monday April 26, 2010 - 20:19:21 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report
Morning Report Tuesday 27 April 2010
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Greece's cloud remains, despite the rescue process formally underway. The market is skeptical of the execution, and believes contagion is a significant risk. Despite Germany's Merkel making some supportive comments, Greek 10yr government bonds blew out to 650bp above the German equivalent. Credit spreads for Portugal and Spain also rose. US equities struggled to advance, improved earnings from Caterpillar and Whirlpool (its stock up 14%) and some M&A activity (Hertz) balanced by ongoing concern regarding proposed bank legislation. Also weighing was news the government's Citibank share sale is likely to start this week. The financial sub-index fell 2.0%, and the S&P500 is down 0.2%. Commodities were mixed, copper's 0.4% gain diverging from oil (-1.3%) and gold (-0.4%). US treasuries were little changed, waiting for Wednesday's FOMC outcome. An auction for $11bn 5yr inflation-linked treasuries was mixed - good demand (from mainly locals) but above-market real yield.
The US dollar firmed slightly overnight, from 81.30 to 81.60. EUR was the underperformer on the day, falling at the European open, from 1.3390 to 1.3292, but partly recovering to 1.3350. GBP held up well, ranging between 1.5430 and 1.5480. USD/JPY was also stable between 94.00 and 94.30.
AUD continued higher while the EUR was suffering, peaking at 0.9312, but succumbed in NY to 0.9260.
RBNZ and Fonterra expectations helped NZD break above its six-month old channel to 0.7256, consolidating around 0.7220. AUD/NZD fell to 1.2810, last seen on 1 March.
US Dallas Fed factory index jumps from 7.2 to 21.1 in April. That's the strongest reading for this regional index since early 2007 and adds to the body of evidence pointing to still solid manufacturing activity early in Q2. The detail showed accelerating production, orders, shipments and jobs in April.
UK house prices rose 1.8% yr in April, according to property researcher Hometrack. In April prices rose 0.2%, their twelfth straight month without a decline.
AUD/USD and NZD/USD outlook next 24 hours: AUD should continue its ranging pattern evident since mid-April, which means 0.9170-0.9310 should contain action today. The NZD's break above 0.7200 was significant, pointing to a move to 0.7400-0.7600 in the weeks ahead. Today's support level is around 0.7200, with upside risk from a Fonterra payout announcement.
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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