Wednesday September 22, 2010 - 20:17:01 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report (Westpac)
Morning Report Thursday 23 September 2010
News and views
Residual FOMC effects supported US treasuries but little else. US equities drifted modestly lower from the Asian session yesterday and are currently around 0.4% lower (S&P500). A weak US house price report helped cap sentiment. Commodities were modestly firmer overall, copper rallying 2.5% to a fresh five-month high amid a weak-dollar backdrop, but oil slipping 0.4% on larger gasoline inventories. Gold (+0.3%) made a fresh record high at $1296 on dollar debasement concerns. Further liquidation of FOMC bets saw US 10yr treasury yields fall another 6bp after the Sydney close to 2.50% before rebounding to 2.55% during late NY. The Portuguese auction of EUR750m 4yr and 10yr government bonds was successful, its 10yr later outperforming German equivalents.
The US dollar index fell further on yesterday's FOMC QE hint to just above 79.50, breaking major support at 80.00. The EUR benefited the most among majors, peaking in NY at 1.3440 and settling under 1.3400. GBP consolidated around 1.5650, the BoE meeting hinting at further stimulus if necessary. NOK was the day's outperformer, firming from 5.95 to 5.87 against the US dollar, its central bank remaining on hold but saying further hikes will be necessary. USD/JPY fell steadily to 84.30, not far off pre-BOJ intervention levels.
AUD made a fresh two-year high of 0.9600 during the NY morning before consolidating around 0.9550.
NZD briefly peeked above 0.7400 major resistance (by 20 pips) before pulling back to 0.7360. AUD/NZD drifted off yesterday's 1.3020 high to 1.2950, forming a reversal pattern (outside down day).
US house prices fall 0.5% in July. The FHFA house price index has now posted back to back falls following the brief run-up in prices earlier this year in the lead-up to the expiry of the tax credit for homebuyers. Note that June's 0.3% fall was revised to a 1.2% drop. This result adds to the swathe of news painting a weak picture of the US housing market in H2 2010.
Japan's all industry index rose by 1.0% in July to be 3.1% higher than a year ago. July's increase was the result of stronger activity in the tertiary sector which was partly offset by weaker activity in the manufacturing sector. However, over the year, the increase in the all industry index has been the result of stronger activity in the manufacturing sector as well as the tertiary sector.
Euroland industrial orders fell 2.4% in July, reversing their June gain. That fall, and base effects, pulled annual growth down from 23% yr to 11% yr. Q3 is shaping up as a weaker quarter for economic growth compared to Q2's solid performance. Also, consumer confidence was stalled at -11 in September.
Bank of England policy meeting minutes showed another 8:1 vote in favour of keeping rates on hold. The dissenter argued for a 25bp tightening, as he has done for some months now, but it is also worth noting that some committee members thought further stimulus might yet be needed (though they did not vote that way in September). So there continues to be a range of views on the outlook for the UK economy at the official level.
Canadian retail sales fall 0.1% in July. Sales have not posted a rise since March. The latest fall was due to weakness in furniture and household goods although auto sales posted a rise. Also in July, the leading index rose 0.5% in Aug, up from 0.4% in July but down from 1+% gains per month in late 2009 and earlier this year.
AUD/USD and NZD/USD outlook next 24 hours: AUD continues its march higher, and any intraday corrections should be limited to 0.9500. NZD remains capped by the 0.7400 area, but a break above would be medium-term bullish.
.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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