Sunday August 29, 2010 - 21:41:49 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report (Westpac)
Morning Report Monday 30 August 2010
News and views
Fed boosts risk appetite. US equities surged after Fed Chairman
Bernankeâ€™s closely followed speech at the Jackson Hole symposium,
where he pledged to ensure a continuation of the recovery, including
using unconventional measures if necessary. Importantly, he
underscored quantitative easing as the favoured option. The S&P500
earlier fluctuated on positive and negative surprises from reports on
GDP and consumer sentiment, respectively, resulting in a fresh August
low, but the 1.7% gain at the close signals (key reversal) multi-day
strength ahead. Commodities closed 1.2% higher overall, oil (+2.5%)
and copper (+1.8%) moving with equities. US 10yr treasury yields rose
17bp to 2.65%.
The US dollar index fluctuated wildly with the economic data and
Bernankeâ€™s speech, but closed little changed. EUR similarly fluctuated,
falling to the session low of 1.2676 as the speech was reported, but
then rallying to 1.2780 upon full digestion. The ECBâ€™s Weber also
commented from Jackson Hole, saying the European recovery is selfsustaining.
USD/JPY firmed from 84.60 to 85.46, the market expecting
policy easing at an emergency BOJ meeting this week. Outperformer
AUD formed a base in Europe at 0.8860, surging to 0.9001 during the
US session. NZD rose from 0.7025 to 0.7150. AUD/NZD gained from
1.2580 to 1.2650, remaining within the weekâ€™s sideways range.
US GDP growth revised from 2.4% annualised to 1.6% in Q2. The
main drivers of the revision were a smaller contribution from
inventories and a larger drag from net exports. With most partial data
suggesting that growth has slowed further in the current quarter, it may
be the case that Q3 GDP data in late October will reveal the economy
has stalled or even contracted modestly.
Fed Chairman Ben Bernanke in his keynote address at Jackson
Hole said that the Fed â€śis prepared to provide additional monetary
accommodation through unconventional measures if it proves
necessary, especially if the outlook were to deteriorate significantlyâ€ť.
He acknowledged that growth was too slow, and unemployment too
high but remained hopeful the economy would pick-up more
sustainably in 2011.
US consumer sentiment revised lower. The final August reading for
the Uni of Michigan index was 68.9, up 1.1 pts on July, compared to
the preliminary August print of 69.6.
German CPI eases from 1.2% yr to1.0% yr in August. The
statistician noted that lower retail gas prices offset higher prices for
UK GDP growth revised up from 1.1% to 1.2% in Q2. Constructionâ€™s
contribution was revised higher, with some offset from a lower services
estimate. Unlike in the US, early partial data for Q3 suggest growth
momentum has been maintained, although aggressive fiscal tightening
will soon impact.
AUD/USD and NZD/USD outlook next 24 hours: The effects of
Bernankeâ€™s stimulatory speech may linger for a session or two,
supporting the commodity currencies. AUD resistance is now higher at
0.9080, while NZD could bounce a little higher to 0.7200 resistance.
NZ business confidence poses event risk today.
.Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 13 August 2010. 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 Westpacâ€™s
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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 registered in England as a branch (branch number BR000106) and is authorised and regulated by The Financial Services Authority. Westpac Europe Limited is a company registered in England (number 05660023) and is authorised and regulated by The Financial Services Authority. Â© 2010 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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