Tuesday October 26, 2010 - 19:13:23 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report (TTN)
Morning Report Wednesday 27 October 2010
News and views
Markets corrected. The S&P500 is currently down 0.2%, although it was down 0.7% before some decent US data on consumer confidence and regional manufacturing activity. Earlier, housing data was weak, and Fedspeak from Hoenig was unsurprisingly hawkish, although Dudley was more sympathetic to QE2. The CRB commodities index (+0.3%) made a fresh two-year high, helped by fresh records in weather-affected cotton (+4.5%) and inventory influenced copper (+0.2%). US 10yr treasury yields were in corrective mode throughout the Asian and US sessions, rising 8bp to 2.64%%. The 2yr auction was well subscribed, the 0.40% awarded rate a fresh record. Greek 10yr government bond yields rose 31bp, perhaps spooked by PIMCO's comments Greece is likely to default within three years.
The US dollar index bounced almost 1% as short positions were pared ahead of key events next week including the Fed meeting and US mid-term elections. EUR fell from the European open around 1.3980 to 1.3830. GBP outperformed after a strong GDP print from 1.5750 to 1.5900. The worst performer on the day was the SEK, moving from 6.56 to 6.74 against the USD, Sweden's central bank hiking the policy rate 25bp to 1.00% but revising down its rate path outlook. USD/JPY rose from 80.60 to 81.65.
AUD fell from the Sydney close of 0.9920 to 0.9815.
NZD fell from 0.7540 to 0.7475. AUD/NZD dribbled slightly lower from 1.3160 to 1.3130.
US consumer confidence rose from 48.6 to 50.2 in Oct. The Conference Board index recovered less than half of its Sep fall to a seven month low. Expectations explained most of this month's rise. The detail showed that labour market conditions deteriorated further for the fourth straight month but business conditions were reported as less weak by the consumers surveyed.
US house prices up/down in Aug, depending on the survey. S&P/CaseShiller reported prices in the 20 major cities down by 0.3%, a second consecutive decline. Annual price growth slowed from 3.2% to 1.7% yr. But the FHFA house price index found prices rose 0.4% in Aug after steeper falls in June-July. The two series are calculated differently and although there is some crossover in coverage the SPCS index tends to include more higher value homes.
US Richmond Fed factory index improves from -2 to 5 in Oct. Shipments, orders and jobs all turned around from stalled or falling to positive in Oct. However the Richmond services index was down from -5 to -7 in Oct and the retail survey edged up just 1 pt to -5.
Japanese corporate service prices fell by 1.1% over the year to Sep, unchanged from August.
German data included the "Nov" GfK consumer confidence index (surveyed in early Oct) which was stalled at 4.9 after four consecutive gains in prior months. Import prices accelerated from 8.6% to 9.9% yr in Sep and North Rhine-Westphalia reported that its local CPI accelerated from 1.1% to 1.2% - other state and the national figures are out tomorrow.
UK GDP growth surprised in Q3. GDP grew 0.8% which was double the consensus forecast, rather like Q2's advance 1.1% (later 1.2%) was double that quarter's consensus forecast. Annual growth in Q3 was 2.8% yr, its highest in three years. The limited breakdown available showed ongoing construction strength; slower but still solid factory growth; falling agricultural output; and very slight moderation from 0.7% to 0.6% in government and services. This result - growth moderating from very strong to still above long term trend - will give more ammunition to the BoE policy hawks and will also embolden the government as the economy seems to have been better placed to handle the recent austerity budget measures.
AUD/USD and NZD/USD outlook next 24 hours: Today's business confidence report provides little risk to the AUD which looks a good intraday buy. NZD should be supported at 0.7520 for a move beyond 0.7560.
.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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