Monday June 28, 2010 - 20:16:35 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Blog - Morning Report (Westpac)
Morning Report Tuesday 29 June 2010
News and views
A moderate dose of risk aversion permeated markets with the exception of European and US equities, although the modest 0.2% gain in the S&P500 is best described as consolidative rather than directional. There was little to excite markets, some quarters latching onto the slightly better US personal spending data. The CRB commodities index fell 0.8%, oil and copper both down 0.7%, while gold (-1.4%) formed a bearish key reversal day. The US treasury curve flattened, 10yr yields falling 7bp to 3.03, an area which is technically pivotal. A break lower would open the way to 2.80. Greek 10yr government bond yields rose 17bp, but other peripherals were quiet.
The US dollar index bounced around 0.6% from the European opening. EUR fell throughout the European and US sessions, from 1.2380 to 1.2266. GBP was firmer, from 1.5020 to 1.5130, amid dividend repatriation chatter as well as BoE hawk Sentance suggesting the Sterling may be undervalued. USD/JPY spiked lower to 89.05 around the US data, otherwise sitting around 89.40.
AUD, the best of the commodity currencies on the day, sat in a narrow range, 0.8707 to 0.8759, as did NZD, 0.7060 to 0.7106. AUD/NZD found support at 1.2300 and traded to 1.2345, forming a bullish key reversal day.
US personal income increased 0.4% in May following an upwardly revised monthly growth rate of 0.5% in April. Spending was up 0.2% over the month following a flat April. Both numbers appear to reflect the recent run of positive payroll numbers. Indeed, wages and salaries posted a second consecutive rise of 0.5% and the largest quarterly gain since Dec 2007. The savings rate also improved to 4% while core PCE was up 0.2% on the month. The deflator slowed moderately to 1.9%Yr from 2.0%Yr.
US Dallas Fed manufacturing dipped back into negative territory during June falling to -4.0. The breakdown was fairly downbeat with all components posting falls and over half now below zero. Of note, production fell from +21 to -2 while new orders (-8 from +16) and shipments (-9 from +15) fared little better. Overall, the out-turn was more negative than the other manufacturing surveys carried out by the Fed. Given the impact on industry following the oil spill in the Gulf of Mexico, however, the dip is not entirely surprising. The Chicago Fed activity index, also released today, showed a decline in activity to 0.21 in May from 0.25 previously.
Japanese retail sales declined by 2.0% in May against market expectations for a -0.1% monthly decline. Growth over the year subsequently decelerated to +2.8%yr, from +4.9%yr in April. The weakness was broad based across small and large stores. Sales at large retail stores were 1.0% lower in the month as supermarket sales declined by 1.4%; department store sales were broadly flat in May.
Eurozone M3 money supply was unchanged from -0.2% in the year to May with the 3m average similarly unchanged from -0.2%. The three month average appears to have levelled off just below flat in recent months. Lending to households accelerated to 2.6% on the year (from 2.5%) although short-term loans to non-financials remained in contraction, albeit at a lesser pace than the previous month.
German inflation slowed to 0.8%yr from 1.2%yr in the preliminary reading for June CPI (EU-harmonised) despite higher oil prices as falls in gas prices and package holidays offset the impact of oil prices.
AUD/USD and NZD/USD outlook next 24 hours: A muted day is initially in store. AUD should again be contained by 0.8680 and 0.8780. NZD should again be capped by 0.7160, but support is now lower at 0.7000.
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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