Tuesday September 7, 2010 - 21:08:44 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report (Westpac)
Morning Report Wednesday 8 September 2010
News and views
Stress from Europe. US equity investors returned from their holiday ina defensive mood as concerns resurfaced over the robustness of the European banking sectors. An earlier Wall Street Journal report which said the recent European bank stress tests may have understated government bond holdings got traction, and Germanyâ€™s banking association separately reported a potential large capital shortfall for its members. An FT report speculated that some of the weaker countries may fail to raise the required funds in September given borrowing needs were twice the size of Augustâ€™s. Peripheral EZ government bonds were hurt, the Irish 10yr up 30bp to equal the Jan-09 high yield of 6.07%. Greece, Portugal, and Hungary also suffered. The S&P500 is currently down 1.0%, banks down 2.9%. Key commodities fell, oil - 1.1%, and copper -1.1%, although gold (+0.6%) behaved defensively and made a two-month high. US 10yr treasury yields fell 10bp to 2.60%. A solid 3yr auction went at a record low 0.79%, with decent offshore interest.
The US dollar index rose on safe-haven buying. EUR slid after Sydney closed, from 1.2800 to 1.2682, the surprise fall in German factory orders not helping. The outperforming yen saw USD/JPY make a fresh post-1995 low at 83.51. AUD fell from the Sydney close of around 0.9140 to 0.9092 during the European session, rebounding in NY to settle above 0.9120. NZD fell to 0.7186 and then settled above 0.7200.
AUD/NZD slipped to 1.2618 after Labour emerged as victors, consolidating around 1.2650.
US ABC Consumer Confidence â€“ yet to be released.
German Factory Orders contracted 2.2% in July, the biggest fall since February 2009. The annual rate eased to 17.7%, the third consecutive decline. Partly weighing on the monthly numbers was the upward revision to Juneâ€™s report to 3.6%. Within the detail, exports were down 3.7%, domestic orders were 0.3% lower while capital goods (-5.5%) and consumer items (-1.0%) also posted contractions. The recent slowdown in the data, albeit from record levels, certainly suggests that the broader German economy will struggle to maintain the recent impressive performance from the first half of this year in the face of a slowdown in the US during the second half.
AUD/USD and NZD/USD outlook next 24 hours: AUD should remain below 0.9180 today, minor support levels above 0.9060. NZDâ€™s rally faltered at 0.7260, further slippage to 0.7180.
.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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