Sunday June 13, 2010 - 23:52:39 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Blog - Morning Report (Wedtpac)
Morning Report Monday 14 June 2010
News and views
The week ended on a slightly upbeat tone, after a mixed Friday session. US equities tracked sideways until a disappointing US retail sales report hurt risk appetite, but that was countered later by an upbeat US consumer confidence report which restored markets to roughly unchanged. A surge in the final 30 minutes of NY trading saw the S&P500 close +0.4%, and the VIX (volatility) index close on a one-month low. Commodities closed slightly higher, the CRB index +0.3%, copper +1.5%, but oil looked soggy all day, closing -2.3%. US treasuries were in demand even before the pair of data releases, the whole curve 6-9bp lower.
The US dollar index closed 0.4% higher on the day, but lost ground after the consumer confidence report. EUR fell from 1.2150 to 1.2045 during the US data releases, rebounding afterwards to 1.2110. USD/JPY tracked sideways around 91.60 apart from a data-inspired dip to 91.20.
AUD ranged around the week's high between 0.8425 and 0.8505, and opens this morning on a positive note at 0.8535.
NZD ground higher with only minor interruptions, from 0.6810 to 0.6910, and opens there this morning. AUD/NZD made a 1.2275 low during early Europe, closing the week at 1.2325.
US retail sales fell 1.2% in May, weighed down by a fall in auto sale values (despite industry data showing a unit sales gain); lower gasoline prices; a sharp pull-back in building materials after two very strong months for DIY; and further declines in apparel, general merchandise and department stores. With eight of the fourteen storetypes in the breakdown recording gains it is not the case that this report showed broad-based weakness however there are enough soft spots in there for us to remain comfortable with our view that the US consumer and indeed broader economy is losing momentum as it heads into mid 2010.
US consumer sentiment posted a further 1.9 pt rise in the prelim June report, evenly divided between current conditions and an improving outlook. But inflation expectations softened.
US business inventories posted another rise in April but at 0.4% it was slower than March's upwardly revised 0.7% which is positive for Q1 GDP revisions but less so for Q2, which could see a modest drag from stock-building.
Fed news: Vice-chair Kohn will stay on until September, delaying his retirement which was scheduled for late June, at the request of Chair Bernanke. Kohn's extension will cover the gap until the new vice chair arrives (Janet Yellen has yet to be confirmed by the Senate). Philly Fed president Plosser noted "some upside risks to inflation" in the medium to longer term, which might require the Fed to "exit from this strategy in a timely manner" (i.e. low rates for an extended period). Plosser does not vote on the FOMC this year.
UK industrial production slipped 0.4% in April after posting sharp monthly gains in February and March. Capital goods output and utilities led the decline but it was broad-based across most sectors. Even so, the trend in production is still upward, consistent with recent positive business surveys. Separately, in May, producer prices fell 0.6% at the input stage, pulling annual PPI growth back from 13.1% yr to 11.2% yr. PPI output prices edged back from 5.9% yr to 5.7% yr and PPI output core prices moderated from 4.5% yr to 4.4% yr. The declines reflect sharp falls in commodity prices.
Canadian capacity utilisation rose from 71.3% to 74.2% in Q1, the sharpest rise yet since CapU began to recover in from its mid 2009 low point.
AUD/USD and NZD/USD outlook next 24 hours: AUD should be quiet initially with Australia on holiday, and has resistance at 0.8550 overhead today which would be cleared later this week if global risk appetite builds on last week's gains. NZD may struggle to beat 0.6900 area resistance today, particularly if retail sales disappoints this morning, but a possible bounce in global risk appetite later this week would take it to the channel top around 0.7100.
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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