Monday July 26, 2010 - 21:53:30 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research -Morning Report (Westpac)
Morning Report Tuesday 27 July 2010
News and views
Equities and currencies push higher. US equities were boosted by surprisingly strong new home sales data, reversing much of the previous month's collapse, and consensus-beating earnings forecasts from economy bellwether Fedex. The S&P500 is currently up 1.1%, transport and homebuilder stocks outperforming. The CRB commodities index was unchanged, as was oil, but copper (+1.3%) benefited from the US data as well as falling stockpiles. The Baltic dry shipping cost index continued its tentative recovery from last week's 2010 low. US 3mth Libor nudged another 0.5bp lower to 0.4875%, reflecting the waning pressure on funding costs since late May. US 10yr treasuries were net unchanged at 3.00%, although they did peak at 3.03% on the US data.
The US dollar index was weaker amid the risk-supportive US session. EUR followed US equities higher to 1.3004 and has held the gain. USD/JPY is weaker, from Sydney's 87.35 to 86.90, although it did spike during the US morning.
AUD was held below 0.8980 until US equities took it higher, stops seemingly triggered above 0.9000 resulting in a 0.9037 high a few hours ago.
NZD similarly triggered stops past 0.7325 and peaked at 0.7353, the outperformer on the day. AUD/NZD ranged 220 pips either side of 1.2300 with a slight downward tilt.
US new home sales jumped 23.6% to 330k in June. While the overall level was above market forecasts, it recovered less than half of the May slump that followed the expiry of the home buyer's tax credit on 30 April. Moreover, sizeable downward revisions to the previous two months casts doubt on how many sales were actually brought forward in response to the tax credit in the first place.
The Dallas Fed manufacturing index fell from -4 to -21 in July. The details were not as dramatic, though the tone was undeniably weaker. Production rose from -1.9 to 4.9, and shipments were less negative, but new orders fell. Prices paid and received were both substantially lower for the month. The oil spill in the Gulf of Mexico is likely to have affected regional activity in the last few months.
The Chicago Fed national activity index fell to -0.63 in June from an upwardly revised 0.31 in May. This index, which comprises 80-odd pieces of previously released data, has been ranging either side of zero since late last year.
The Japanese trade balance widened to JPY687bn in June from JPY321bn in May. The seasonally adjusted surplus improved by about half that amount to JPY456bn. Nominal exports fell for the second month in a row, pushing annual growth down from 40.4%yr in April to 27.7% in June. On the volume side, imports ended the quarter with more momentum than exports, being up 12% versus their level at the end of Q1, against a 7.3% rise in exports.
AUD/USD and NZD/USD outlook next 24 hours: With risk appetite stronger and key resistance levels in AUD and NZD having broken, the outlook for the day is bullish. AUD support is now around 0.8980 with few obstacles overhead until 0.9100. NZD support is now at 0.7325 (old resistance) and 0.7440 is the next major overhead target.
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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