Tuesday June 1, 2010 - 20:39:53 GMT
Share This Story
Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report (Westpac)
Morning Report Wednesday 2 June 2010
News and views
Sentiment was weak until the European mid-morning, but turned around to leave most markets only modestly changed. Weaker China PMI data, the geopolitical incident involving Israel, and European downgrade rumours kept a lid on appetite until better US data perked up the market. The S&P500 is currently down 0.8%, having opened weaker, rebounded, and weakening again as we write. Commodities are 1% weaker in aggregate, oil down 1.7%, and copper -1.4%, China's influence as the world's largest consumer of copper, and second largest consumer of oil, affecting prices as its economy softens. US treasury yields fell and rebounded with global sentiment t and the US data, for little net change. Canada's central bank hiked its policy rate by 25bp to 0.50%, but the accompanying statement was more cautious than the market has expected, and CAD yields fell in response, the 2-10yr government bond curve steepening by almost 10bp.
The USD index fluctuated with risk aversion and is slightly firmer. EUR fell to 1.2110 during the morning, rebounding to 1.2353 with US equities, and is currently slipping below 1.2250. USD/JPY is little changed after a volatile evening. CAD firmed ahead of the BoC meeting but was sold immediately afterwards from 1.0470 to 1.0560 (vs USD).
AUD made an 0.8282 evening low before following US equities in a range capped by 0.8437.
NZD's range was 0.6700-0.6840, neither the Fonterra auction nor BoC supportive. AUD/NZD declined to 1.2300.
US factory ISM slips from 60.4 to 59.7 in May. Still a very solid industrial indicator, but perhaps an early sign that further acceleration in factory sector activity is unlikely. New orders held at their recent high, but production slipped marginally. Employment actually rose further, up 1.3 pts to 59.8. In contrast, the Dallas Fed factory index plunged from 21 to 3 in May, suggesting a steeper pull-back in the pace of industrial growth in the south.
US construction spending surges 2.7% in April. No surprise that the residential component surged 4.5%, in the closing days of the tax credit for homebuyers, but the 2% jump in non-residential spending was unexpected.
Euroland PMI factory revised down from 55.9 to 55.8 in April. The makes the fall between April and May now 1.8 pts. In other news, Euroland unemployment rose from 10.0% to 10.1% in April, its highest since 1998 (before the euro was introduced).
German retail sales rise 1.0% in April. This failed to reverse the 1.6% fall in March and left sales volumes down 3.1% on year ago levels. Then in May, German unemployment fell 47k, continuing to defy expectations although the government's "short working" scheme does flatter the numbers.
UK factory PMI steady at 58.0 in May. Factors at play last might be the change in government, sterling depreciation and worries about the European economy, the major market for UK exports.
Bank of Canada begins tightening cycle. The BoC lifted the overnight target by 25bp to 0.5%. The statement noted that "Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments." That suggests that we should not 100% assume we will get consecutive 25bp hikes at each meeting this year, though that is Westpac's forecast.
AUD/USD and NZD/USD outlook next 24 hours: Today's global backdrop is negative. AUD minor support at 0.8280 is vulnerable, opening the way to 0.8200. NZD minor support is at 0.6700, major support at 0.6600.
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
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."