Tuesday May 11, 2010 - 20:48:48 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report (Westpac)
Morning Report Wednesday 12 May 2010
News and views
Calmer markets. US equities held the previous two days' gains, there being little fresh news of global significance to digest. The S&P500 is unchanged, the Eurostoxx 50 earlier closing down 1.0% on concerns about the efficacy of the aid package. ECB member Wellink said the package would only be effective if deficit reduction commitments were adhered to. Rating agency Moody's said the package was marginally credit-negative for the stronger Eurozone countries. And the IMF said the size of their contribution - EUR250bn - was "theoretical", there being no "blanket commitment" to the package. Commodities were subdued (CRB unchanged) on Eurozone skepticism, oil (-1.0%) and copper (-1.8%) hurt also by China growth concerns in the wake of yesterday's batch of data releases. Safe-haven gold made a record high of $1234.50. US treasuries were little changed. The 3yr auction was a success, with an on-market yield and better bid-ratio.
The US dollar index is little changed at around 84.50. EUR, too, was content to range sideways between 1.2670 and 1.2750. GBP outperformed the majors (1.4720 to 1.5005 to 1.4940), driven by news Gordon Brown has resigned as leader of the Labour party, and a coalition between the Conservative and Liberal-Democrat parties was imminent. USD/JPY ranged between 92.20 and 93.15.
AUD gyrated with US equities, slipping to a European low of 0.8933, bouncing to 0.9023, and currently at 0.8960. The Budget's improved fiscal projections had little market impact.
NZD ranged between 0.7160 and 0.7210. AUD/NZD remained in a multi-day consolidation between 1.2450 and 1.2510.
US NFIB small business survey rises from 86.8 to 90.6 in April. This is an important result. Small business sentiment jumped in April from an eight month low in March to its highest since the dying days of Lehman Bros in September 2008. The detail showed significant improvement in expectations of a better economy and higher sales, although plans to hire rose just one tick and remained in the recent subdued range, which could be a signal that the latest acceleration in payroll employment growth might not be sustainable.
But on that point, Richmond Fed president Lacker said "we are already seeing evidence that employment is on the path to steady growth" and he expressed doubt that inflation would remain at recent lows which means "we will need to be careful to avoid waiting too long to raise rates".
US IBD-TIPP economic optimism edged up from 48.4 to 48.7 in May, its second consecutive gain and almost lifting it back to January's 48.8 reading. The detail showed deteriorating economic outlook and personal finances, but a decent jump in the assessment of Federal policies (from a low level).
US wholesale inventories rise 0.4% in March, a soft outcome that could see stocks contribute to a modest downward revision to Q1 GDP growth depending on what the broader business stocks number does on Friday.
UK industrial production surged 2.0% in March, the fastest monthly gain since a bounce in July 2002 when public holidays were shifted around for the Queen's Jubilee, and prior to that since the late 1980s. This result suggests sterling depreciation is finally having an impact and Thursday's trade numbers should show a sharply narrower deficit.
AUD/USD and NZD/USD outlook next 24 hours: Lingering caution regarding the Eurozone should keep AUD and NZD restrained today. AUD's immediate range should be 0.8930-0.9070, NZD's 0.7150-0.7250.
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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