Wednesday October 27, 2010 - 19:14:36 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Blog - Morning Report (TTN)
Morning Report Thursday 28 October 2010
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Risk appetite retreated further, as expectations regarding Fed easing were pared back. Influential WSJ Fed watcher Hilsenrath predicted a more incremental and flexible approach to be unveiled at next week's FOMC meeting, and the market is speculating better economic data lately may temper the scope of QE2. The S&P500 is currently down 0.9%, also hurt by the core durable goods release. The CRB commodities index fell 0.9%, industrial components oil (-1.5%), copper (-2.6% and key day reversal), and gold (-1.3%) all suffering. US 10yr treasury yields continued to reverse higher, up 7bp to 2.71% on QE2 sentiment. Unsurprisingly, the 5yr auction was ordinary, 1.6bp above market with muted foreign bidding.
The US dollar index followed US treasury yields higher. EUR suffered from the better dollar sentiment, falling from an intraday peak of 1.3853 to 1.3734. NOK held its ground around 5.90 after the Norwegian central bank kept the policy rate on hold at 2.00%, noting low inflation and a bumpy recovery. The yen outperformed, USD/JPY ranging between 81.50 and 82.00.
AUD underperformed after yesterday's surprisingly muted inflation print, and drifted lower from the Sydney close of 0.9745 to 0.9652.
NZD followed, from 0.7480 to 0.7405. AUD/NZD was contained between 1.3000 and 1.3050 following a vicious plunge after the Australian data.
US durable goods orders jump 3.3% in Sep but ex transport down 0.8%. This was in line with Westpac's above consensus 3% forecast for total orders and our below consensus flat forecast ex transport. Civilian aircraft orders surged 105% but core capital goods orders fell 0.6%. Overall shipments were down 0.4% but core capital shipments rose 0.4%; they have not posted a decline since January though Sep's gain was well below this year's trend.
US new home sales rose 6.6% in Sep, taking the annualised sales pace to 307k. That's 9% off the May 2010 low of 282k but down 79% on the July 2005 peak when sales were running at just below a 1.4mn pace. Regardless of monthly changes at these levels, the US new housing market remains extremely weak.
Japanese small business confidence fell to 46.3 in October, from 47.3 in September. The decline was broad based across both manufacturing (48.0 from 48.6) and non-manufacturing (45.1 from 46.3).
Euroland money supply M3 growth slowed a tick to 1.0% yr in Sep. However growth in loans to the private sector held steady at 1.2% yr. While no longer outright contracting on an annual basis as was the case last year, the uptrend in money supply/lending growth rates appears to be stalling at still very weak levels.
German inflation steady at 1.3% yr in Oct according to the preliminary report. Steady oil prices and the appreciating euro would have been factors at play.
Canadian house price inflation slowed by 2 ppts to 10.4% yr in Aug according to Teranet/National Bank. More evidence of the housing slowdown now on both sides of the US/Canada border.
AUD/USD and NZD/USD outlook next 24 hours: AUD's sell-off is overdone on intraday (hourly) measures, so some consolidation around 0.9700 is likely today. NZD is testing important 0.7400 area support, and could break lower if the RBNZ's statement today is more dovish than it was in September.
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