Tuesday June 8, 2010 - 20:21:40 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report (Westpac)
Morning Report Wednesday 9 June 2010
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Risk sentiment improved slightly. US equities started the session on a weak note, the S&P500 slipping to near its 1040 support level, but re-gathered to be up 0.9% as we write. Earlier, UBS equity analysts said weakness in Europe could hurt shipments, hurting chipmaker stocks, and Fitch warned the UK faces a formidable fiscal challenge requiring more austere measure than already announced, keeping markets on sovereign alert. These counter-balanced Fed Bernanke's "continued US recovery" comments, plus Honeywell (in NY) saying European orders are not softening. The CRB commodities index is up 0.4%, oil +0.8%, but metals little changed. Gold made a fresh record high at $1252, but slipped in NY for a 0.2% loss. US 10yr treasury yields rose 3bp. The 3yr auction was awarded at 1.22%, a record low yield but 1bp above pre-auction market, recent volatility probably making pricing difficult.
The US dollar index is unchanged, having ranged near the recent high during much of the evening. The EUR stabilised between 1.1900 and 1.2010. GBP was the day's underperformer, falling from 1.4580 to 1.4347 after the Fitch comments, and settling at 1.4390. USD/JPY slipped from 91.90 to 90.85.
AUD was weaker during early Europe, at 0.8133, but followed the EUR higher to 0.8266 before the equities pullback impacted. On the day it outperformed at +1.4%.
NZD initially made another attempt on 0.6575 support before bouncing to 0.6680. AUD/NZD nudged higher to 1.2400.
US NFIB small business optimism rises to 92.2 in May, its highest since September 2008. The intention to hire index turned slightly positive for the first time since then as well, suggesting the small business sector will no longer be a drag on employment growth in coming months.
US IBD-TIPP economic optimism falls to 46.2 in June. That is the lowest reading since March. It reflected a sharp slide in the assessment of the economic outlook, and lesser slippage in federal policies and personal finances.
Japanese seasonally-adjusted current account narrowed to JPY1379.6bn in April from JPY1773.1bn. This outcome was a little below expectations. In April, goods exports rose by 5.3%, but this was more than offset by an 8.1% increase in imports, resulting in a decline in the trade balance. Net income from services and investments also declined in the month.
Japanese bank lending weaker in May. The pace of decline in bank lending accelerated to -2.0%yr, from -1.8%yr in Apr. This was the result of weaker lending by city banks (-3.9%yr from -3.4%yr) with the pace of decline in regional bank lending unchanged in the month at -0.1%yr.
German industrial production rose 0.9% in April, building upon March's 4.3% jump, as the weaker euro and stronger orders growth really start to impact on the factory sector.
British Retail Consortium reported a 0.8% yr May increase in same store sales, compared to a 2.3% yr decline in April, though the May sales pace was still below that in Feb and March.
Canadian housing starts down 6.3% in April. This reflected declines in single and multi family urban housing, and adds to the sense that the Canadian housing market might be coming off the boil somewhat.
AUD/USD and NZD/USD outlook next 24 hours: AUD/USD and NZD/USD outlook next 24 hours: The slightly better backdrop for risk today should support the currencies above their critical levels. AUD's critical support level is more precisely 0.8070, which has held well against the 3 attempts over the past month. We expect a corrective move toward 0.8300 today. There's Australian data plus RBA's Governor Stevens' speech to watch for. NZD's channel support around 0.6580 has also held well so far, and a bounce to 0.6700 is expected today.
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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