Thursday June 10, 2010 - 20:28:57 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report (Westpac)
Morning Report Friday 11 June 2010
News and views
Risk appetite rebounded strongly from oversold levels, global economic data providing enough catalysts for the moves. During yesterday's Asian session we saw China's surprise trade balance gain, Australia's solid employment report, Japan's positive GDP surprise, and a Eurozone 2010 growth upgrade by the ECB (although 2011 was downgraded). Also supportive were successful debt sales by Spain, Italy and Ireland. The S&P500 is up 3.0%, the energy sector outperforming (+4.9%). Commodities rose, the CRB index up 0.8%, oil +1.6%, copper +0.9%, but gold -1.1%. US 10yr treasuries rose 15bp in yield, following equities' lead. The 30yr auction went well, around market. Peripheral Eurozone government bonds rallied, shedding some risk premium.
The US dollar index fell as risk aversion declined. EUR rose from around 1.2000 to 1.2135. The ECB meeting produced few revelations of substance, and remained coy about future asset purchase or funding programs. USD/JPY ranged around 91.20.
AUD rose steadily from 0.8355 to 0.8510. Apart from its employment data, there was an expectation changes to the proposed mining tax may be announced today, and economic journalist Michael Stutchbury wrote of full employment.
NZD continued higher to 0.6875, post the RBNZ rate hike, and was the day's outperformer. AUD/NZD ranged sideways during the evening around 1.2375.
US trade deficit widens from $40.0bn to$40.3bn in April, reflecting a 0.4% fall in imports and a 0.7% fall in exports. Those modest declines followed 3%/4% jumps in imports/exports in March so underlying trade trends remain solid.
US initial jobless claims fell 3k to 456k last week, stuck in the recent range and showing no evidence of improvement in labour market conditions, on this measure, for some months now. In the previous week, the number of continuing claims fell sharply - by 255k - to 4462k but this may reflect claims expiring rather than the unemployed finding new jobs (the number on special extended/emergency benefits rose 69k to 5390k in the week before that).
Japanese Q1 GDP revised slightly higher in second estimate to 5.0% saar (prev 4.9%). In quarterly terms, Q1 growth was unrevised at 1.2%.
Japanese corporate goods prices +0.4%yr in May. Domestic corporate goods prices rose by 0.4%yr in May after increasing by 0.1% in the month. The April outcome was also revised up to a -0.1%yr, previously -0.2%yr.
Canadian trade close to balanced again. March's C$0.2bn deficit became a C$0.2bn surplus in April, reflecting a price driven 2.2% fall in imports, while exports were down by 1.0%. In other news, new home prices rose 0.3%, their tenth consecutive monthly gain.
European Central Bank leaves rates on hold at 1.00%. In the press conference ECB chief Trichet published new staff economic projections, including a slight upgrade to the GDP growth forecast range midpoint this year (from 0.8% to 1.0%), but downward next year (from 1.5% to 1.2%). There were no other revelations of substance.
Bank of England on hold at 0.50%, asset purchase program unchanged at GBP200bn. No statement was issued.
AUD/USD and NZD/USD outlook next 24 hours: The rebound in risk appetite overnight should support the currencies today, although they look due for an intraday breather. AUD should run into resistance at 0.8550 but hold above 0.8400. NZD should also meet resistance soon, at 0.6900, but should hold above 0.6700.
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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