Monday August 30, 2010 - 20:45:34 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report (Westpac)
Morning Report Tuesday 31 August 2010
News and views
No follow through from Friday. Expectations for the US data releases may have been higher than the published consensus, because the releases coincided with the clear turnaround in US equities. Personal spending slightly beat consensus but personal income just missed, questioning the sustainability of the former. The S&P500 is currently down 1.5%, with the banksâ€™ sector underperforming at -3.2%. Commodities overall are little changed, oil down 0.6%, but copper up 1.2% to a 27 April high on optimism that the worldâ€™s central banks will support growth. US 10yr treasury yields fell 10bp to 2.54%, in line with the equities move, and unfazed by news US officials are discussing new fiscal stimulus as well as unconfirmed rumours the head of Chinaâ€™s central bank has fled after losses on US treasuries.
The US dollar index rose from the European session onwards, currency trading thinned by the London holiday. EUR conversely fell, from 1.2750 to 1.2660, the underperformer of the day. USD/JPY continued its decline in the wake of disappointment around the scope of stimulus from yesterdayâ€™s BOJ meeting, from 85.10 to 84.55. AUD fell from 0.9000 to 0.8926 after Sydney closed, following the EUR more than US equities. The NZD fell from 0.77115 to 0.7080. AUD/NZD remained within the recent range, a Â˝ cent lower at 1.2600.
US personal income and spending grew modestly in July. Incomes lifted 0.2% from June, led by 0.3% growth in wage and salary income. Spending rose 0.4%, the fastest monthly pace since March. Durable goods spending led the charge, although non-durables and services spending also increased. The saving rate ticked down to 5.9% after two months above 6%. Real spending grew 0.2% as the top-line PCE deflator rose 0.2%. Core prices rose 0.1%, with low inflation supporting consumer budgets.
US Dallas Fed factory index still weak. After plunging to -21 in July, general business conditions improved modestly in Aug, rising to -13.5. However, at these levels conditions remain well in negative territory. Overall, the survey demonstrated ongoing deterioration, especially in current perceptions of business conditions, with an emphasis on the hit to businesses due to the recent deepwater drilling moratorium. The employment index turned negative for the first time in six months.
Eurozone economic sentiment rose from 101.1 to 101.8 in August. This is the third consecutive increase and puts the index at its highest since March 2008.
Canada's current account deficit widened to C$11 billion in the second quarter of 2010, from a deficit of C$8.5 billion (revised) in the first quarter. This is the seventh straight quarter that the current account has been in deficit.
Canada's industrial product price index rose 0.1% in July (weaker than the 0.4% expected), driven mainly by higher prices for primary metal products. During the same month, the raw materials price index rose 1.8%, largely because of higher prices for crude oil.
AUD/USD and NZD/USD outlook next 24 hours: The weak US close should cap AUD at 0.9000 today, but thereâ€™s plenty of event risk from retail sales, current account, and private sector credit data today. NZD should be capped by 0.7110, minor support at 0.7080 vulnerable.
.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
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 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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