Monday July 19, 2010 - 20:29:06 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report (Westpac)
Morning Report Tuesday 20 July 2010
News and views
A slightly firmer tone to an uneventful evening. US equities staged a tentative recovery during Europe on continued decent US company earnings, but were dented upon the release of sub-consensus US homebuilder confidence data. A second advance a few hours later sees the S&P500 currently up 0.5%. There was only a minor stir when Moody's downgraded Ireland from Aa1 to Aa2, citing a gradual loss of financial strength as reflected by its deteriorating debt affordability. That Standard & Poor's already rates Ireland AA- dampened the news. Irish 10yr government bonds initially gained 10bp in yield but ended the session gaining only 1bp more than German equivalents. Commodities were generally contained by recent ranges, gold (-0.8%) notable for a fresh 21 May low. US treasuries consolidated, the 10yr gaining 4bp in yield to 2.96%.
Currencies recorded only modest net changes. The US dollar index consolidated just above the recent low for little net change on the day. EUR lost around 40pips to 1.2870 on the Moody's announcement, but rebounded strongly to 1.2990 soon afterwards, consolidating around 1.2960 for the remainder of the evening. After an intraday spike to 87.20, USD/JPY settled around 86.80.
AUD fluctuated between 0.8655 and 0.8720, spending late NY above 0.8700. RBA watcher McCrann opined the August election was irrelevant to the RBA's rate decision early that month, inflation being the crucial factor.
NZD also flip-flopped, from an early 0.7114 intraday high to 0.7030 to 0.7080. AUD/NZD gained from 1.2260 to 1.2325.
US NAHB Housing Market Index falls from 16 to 14 in July. The home builder index fell to 14, a pessimistic outturn, and all sub indices fell. The headline drop is attributed to the expiration of tax credits at the end of April, which is consistent with this index trending down since May. However, the index is now at a one-year low and not far from its single digits at the beginning of 2009 - also its all time low.
Euroland current account deficit weakens to EUR5.8bn in May. The deficit worsened this month, primarily due to a greater income deficit (from EUR3.0bn to EUR4.4bn), which outweighed the rising goods balance (from EUR0.6bn to EUR3.1bn).
AUD/USD and NZD/USD outlook next 24 hours: With only minor event risk until Bernanke's testimony on Wednesday, currencies should be contained during today's domestic sessions. AUD remains supported at 0.8600 and capped at 0.8800. NZD should be contained by 0.7000 and 0.7160.
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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