Sunday October 3, 2010 - 23:33:30 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report (Westpac)
Morning Report Monday 4 October 2010
News and views
More of the same in currency markets over the weekend, as traders reacted to the prospect of more quantitative easing from the Fed by selling the US dollar against almost everything. The USD index sank another 0.9% after NY Fed president Dudley said that more action is warranted unless the outlook changes from here, and suggested that $500bn of bond purchases would provide about as much stimulus as a 0.50-0.75% rate cut (the numbers themselves are less significant than the fact that the Fed is trying to quantify the effectiveness of QE). The euro rose 1.2% to 1.38, its highest level since March, while gold set another record high of $1320/oz.
NZD broke from its recent 0.73-0.74 range to set a new high for the year of 0.7463, before edging back to 0.7445 this morning.
AUD was a relative underperformer for a change, failing to push beyond its recent high of 0.9730, though a test of the post-float high of 0.9850 seems inevitable.
US core PCE deflator up 0.1% in Aug, and the annual rate was steady at 1.4% yr. The report also included stronger than expected estimates for personal income (0.5%) and spending (0.4%) growth, further evidence that the economy was still ticking over in the middle of the quarter just finished, rather than stalled.
US ISM factory survey down from 56.3 to 54.4 in Sep. This reflected lower readings for production, orders and jobs, although all held above 50. Note the contrast once again with the sharp jump higher in the Sep Chicago PMI.
US UoM consumer sentiment revised up from 66.6 to 68.2 in final Sep reading. Quite a substantial upward revision, although it leaves in place modest slippage relative to Aug's 68.9 reading.
US construction spending up 0.4% in Aug, but July's fall revised to a steeper -1.4%. In Aug private construction spending fell 0.9% but this was offset by the public component which jumped 2.5%.
Fedspeak: NY Fed president Dudley said that the outlook for US jobs and inflation is unacceptable and that "further [Fed} action is likely to be warranted".
Japanese data: the unemployment rate and jobs-to-applicants ratio were both on expectations (a 0.1pt improvement in each, to 5.1% and 0.54 respectively). The labour market indicators in Tankan have shown modest improvement, but in absolute terms, firms still think they have more labour than they need. The upside surprises came from Tokyo September CPI (-0.6%yr from -0.9%yr in August, core still subdued with food the driver of the headline move) and real household spending (+1.7%yr from 1.1% prior). The nationwide CPI was steady at -0.9%.
Euroland unemployment was steady at 10.1% in Aug, for the fourth month running. The factory Euroland PMI was revised up slightly from 53.6 to 53.7 in the final September reading - but that is still a 1.4pt fall from August. German retail sales fell 0.2% in Aug, their third consecutive monthly fall.
UK PMI factory slips from 53.7 to 53.4 in Sep. This is the fourth consecutive month of decline and leaves the Q3 PMI average of 94.7 more than 3 pts lower than the Q2 average of 57.9, indicative of a significant slowdown in economic activity last quarter. Other data included a GBP6.2bn mortgage equity injection (i.e. negative withdrawal) in Q2 - the ninth straight quarter since equity withdrawal ended in early 2008, according to the BoE data.
.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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