Thursday June 24, 2010 - 20:08:47 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report (Westpac)
Morning Report Friday 25 June 2010
News and views
Equities suffered again as ongoing concerns over sovereign credit in peripheral Europe combined with reports of escalating tensions in the Middle East to send the major indices lower. Unsubstantiated rumours of an imminent Greek default saw European bourses down 1-2% while the S&P500 is currently down 1.8% having sold off steadily throughout the day. A watered down US financial reform bill was nearing completion on Thursday but did little to lift spirits. Greek 5yr CDS widened out to a new record of 1077bps intraday. Commodities were a touch higher with copper up 2.5% while energy markets underperformed with oil flat on the day. US 10yr treasury yields were down 5bp across the board at one stage but finished the day mostly flat.
The US dollar index made a couple attempts to clear 86.0 during the European session but failed to break higher and subsequently drifted lower following the US open and is currently 85.73. EUR ranged between 1.2262 and 1.2300 before rallying up to 1.2360 in late European trading. GBP was contained within a 1.4960 - 1.5010 range for most of the day.
The change in leadership in Australia failed to provide much support to AUD which sold off from 0.8770 before settling into a 0.8650-0.8700 range as the market awaits further clarity on the mining tax proposal.
NZD similarly ranged between 0.7035-0.7080 for most of the European/US sessions before breaking up through 0.7100 late in the day.
US durable goods fell 1.1% in May, slightly better than consensus but much lower than the 3.0% growth registered in April. Orders excluding transportation, however, increased for the third month in four with a 0.9% rise offsetting the 0.8% decline the previous month. Non-defence capital goods excluding aircraft posted a healthy 2.1% increase suggesting that the manufacturing sector is holding up reasonably well with firms willing to invest.
US initial jobless claims for w/e 19 July fell to 457k from an upwardly revised 476k, dipping modestly below the four-week moving average of 462.75k which itself declined by 1k. While the downward trend in jobless claims appears to have levelled off somewhat in recent weeks, the level of claims still appears to be consistent with job creation. Next week's non-farm payrolls, in particular private payrolls, should provide a better indication at the health of the US labour market.
Japanese corporate service price index -0.8%yr in May, from -1.1%yr in April. Corporate service prices declined by 0.1% in May to be 0.8% lower over the year.
Japanese trade balance below expectations at JPY416.1bn in May. The April outcome was also revised lower to JPY507.7bn, from JPY729.1bn. In May, exports declined by 1.2% while imports rose by 0.4%.
Eurozone Industrial new orders posted a third consecutive monthly gain rising by 0.9% in April. The annual rate improved to 22.1% from 20.3% previously. Orders have been on an upward trend since April 2009 and are currently at the highest annual rate since May 2000 as the euro's recent sharp depreciation over the year provides support to the export sector.
AUD/USD and NZD/USD outlook next 24 hours: AUD looks heavy with 4 consecutive "lower highs and lower lows". Topside should be limited to 0.8775 with markets eyeing a potential break of 0.8650. NZD is showing better tone though 0.7050 - 0.7150 likely to contain price action in the next 24hrs.
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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