Monday September 27, 2010 - 20:34:17 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Monring Report (Westpac)
Morning Report Tuesday 28 September 2010
News and views
US equities couldn't rally any further, the S&P500 stuck below 1150 resistance and unchanged on the day. Positive and negative factors, respectively, included a continuation of corporate M&A activity amid an environment of cash surpluses, and Moody's downgrade of Anglo Irish Bank from A3 to Baa3, one notch above junk grade, with the comment further downgrades are possible if the government doesn't guarantee outstanding bonds. Commodities overall are little changed, oil (-0.4%) and copper (-0.5%) looking toppish. The Moody's news helped US 10yr treasury yields fall 9bp to 2.51%, flattening the 2-10yr curve by 8bp. A strong 2yr auction went at a record low yield of 0.441%, with a bid-cover ratio of 3.8 (highest since August 2007) and offshore bids comprising 39%. Irish 10yr government bond yields rose 10bp to a record spread of 430bp above German equivalents.
The US dollar index was little changed, ranging between 79.20 and 79.50. A CNBC survey of analysts suggests QE is largely priced in, 70% believing it will probably start in either November or December and be worth around $0.5t. EUR found the 1.3500 area an obstacle, spending most time in the upper 1.3400's. USD/JPY remained heavy but again couldn't breach 84.10.
AUD's late-Sydney base of 0.9575 launched it to a fresh two-year high of 0.9639, making it the strongest major on the day.
NZD followed the AUD in dampened fashion from 0.7330 to 0.7365. AUD/NZD ground half a cent to a fresh five-month high of 1.3095.
US Chicago Fed national activity index down from -0.11 to -0.53 in Aug. This composite index of previously released data adds to the weight of evidence pointing to softening economic activity in the third quarter.
US Dallas Fed factory index falls 4.2pts to -17.7 in Sep. Substantially weaker than expected, although the Dallas Fed index has tended to under perform the other regional indexes due to oil industry specific factors.
Japan's adjusted trade balance was broadly unchanged in August at JPY589.7bn. Exports fell 2.3% in Aug, and year-ended export growth moderated to 15.8%. Imports fell 2.5% in Aug, but are 17.9% higher over the year.
Japanese corporate service prices fell by 0.4% in August to remain 1.1% lower over the year.
Euroland M3 money supply growth accelerates from 0.2% to 1.1% yr in Aug. This stronger growth rate was accompanied by further acceleration in growth in loans to the private sector, up 1.2% yr.
UK house prices down 0.4% in Sep. The Hometrack measure fell for the third month running pulling annual growth down to just 1.0% yr. All major UK house price measures are now decelerating as the apparent upswing in the sector has failed to extend beyond the first half of 2010.
AUD/USD and NZD/USD outlook next 24 hours: AUD retains upward momentum today with minor support now higher at 0.9580. An overbought condition will likely see a correction during the week ahead. NZD remains inside a 0.7320-0.7420 range.
.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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