Thursday September 23, 2010 - 20:43:15 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report (Westpac)
Morning Report Friday 24 September 2010
News and views
Risk aversion crept back. US equities are lower (S&P500 -0.9% currently) after fluctuating on European and US data. Weak European PMI and Irish GDP reports grabbed the early attention and pushed equities 1.5% lower before the firmer US home sales and leading indicator helped a partial recovery. Commodities were up 0.5% overall (CRB index) but couldn't break above the week's range. Shipping costs continued the two-week slump. US 10yr treasury yields made a fresh week low at 2.48% after the jobless data but recovered to 2.55%, unchanged on the day. Ireland's 10yr government bonds underperformed Germany's by 24bp, Portugal's by 22bp.
The US dollar index firmed slightly in line with the risk averse hue in Europe. EUR fell from 1.3400 to 1.3305 after the Eurozone data, recovering to around 1.3350. GBP outperformed, rising from 1.5620 to 1.5740 on EUR/GBP trades. USD/JPY attempted a break below 84.25 but failed.
AUD fell with the EUR from 0.9560 to 0.9467 but recovered to above 0.9500 in NY.
NZD underperformed, thanks to a dismal GDP print, and fell further in Europe from 0.7330 to 0.7265 but recovered to above 0.7300. AUD/NZD was affected by the negative global sentiment after peaking at 1.3080 during early Europe and slipped to 1.3000.
US existing home sales jump 7.6% in August. That is not an impressive gain given that sales fell 27% in August. The annualised pace of 4.13mn is still down 36% compared to nine months earlier when sales surged in what were though to be the last days of the tax rebate for home buyers, subsequently extended to April this year.
US leading index up 0.3% in August, its strongest growth rate since May, and consistent with the economy continuing to tick over at a modest pace for the next few quarters.
US initial jobless claims up 12k to 465k last week, exactly in line with Westpac's view, which was based on the assumption that claims were understated earlier this month due to issues associated with the Labor Day holiday. That level of claims is close to the 4 week trend pace of 463k, which in recent times has been consistent with modestly positive growth in payrolls employment.
Euroland advance PMI composite down from 56.2 to 53.8 in Sep. This advance report showed a 1.5 pt fall to 53.6 in the factory PMI and a steeper 2.3 pts fall in services also to 53.6. The composite index decline was the steepest since the uptrend in these business surveys began early last year, and is another sign the strong pace of Q2 GDP growth will not be sustained.
UK mortgage lending slows in August. Yet another figure, this time from the BBA, showing 32k new mortgages, the slowest monthly pace since April 2009.
AUD/USD and NZD/USD outlook next 24 hours: AUD looks tired from its stellar run and could retreat to 0.9460 support. NZD has shied away from 0.7400 after three attempts since July, minor support today at 0.7260.
.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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