Sunday November 7, 2010 - 21:46:59 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report (Westpac)
Morning Report Monday 8 November 2010
News and views
The eagerly awaited US jobs data surprised with a large gain, supporting equities, commodities and the US dollar. The 151,000 jobs added to non-farm payrolls in October (plus positive back-revisions) exceeded the +60,000 consensus forecast, and gave the sagging S&P500 a lift to close up 0.4% at a fresh two-year high. The CRB commodities index (+0.4%) also made a two-year high, silver (+1.7%) and steel (+1.9%) notable. US 10yr treasury yields closed 4bp higher at 2.53%, although did reach 2.57% on the payrolls news. Among Eurozone peripherals, the Greek 10yr stood out underperforming Germany by 23bp.
The US dollar index bounced off Thursday's low to close up 0.9%, the reaction to the payrolls news positive. Underperformer EUR was already under pressure in Europe, falling from 1.4200 and reaching 1.4024 in NY. USD/JPY rose from 80.62 to 81.47, unaffected by a surprise-free BoJ meeting. The US data appeared to support the higher beta currencies.
AUD just made a fresh high of 1.0182 in Europe, dipping to 1.0086 before the data boost back into the 1.0140-1.0180 range.
NZD was also sagging ahead of the data, but rebounded to the 0.7975 recent high afterwards. AUD/NZD peaked at 1.2833 in Europe, losing a cent in NY.
US non-farm payrolls up 151k in Oct. Non-farm payrolls posted their first rise since May, now that four months of temporary Census worker layoffs is essentially complete. Private payrolls posted their tenth straight gain and at 159k it was the second strongest of the year so far, after April's 241k private jobs rise. With back revisions, which added 100k jobs to the August and September figures, private payrolls have grown by in excess of 100k in each of the last four months. That reasonably up-beat picture is only marred by the fact that the separate household survey jobs measure fell by 330k, its first decline for three months. That contributed to a very slight rise in the unemployment rate, although after rounding it was unchanged at 9.6%.
US pending sales of existing homes fell nearly 2% in Sep, failing to validate the surprise 10% jump in existing home sales completions already reported for September. The soft pending result suggests the housing "recovery" from the post tax rebate sales collapse might be losing some momentum.
BoJ sets guidelines for asset-purchase program; no change to structure or size of program. At the conclusion of its meeting, the BoJ announced that it will "purchase assets through the program sequentially, starting with Japanese government bonds at the beginning of this week, so that the effects of comprehensive monetary easing will quickly spread".
Euroland retail sales fell 0.2% in Sep, as they did in August, the first back to back falls in this measure of spending since Q3 last year.
German factory orders fell 4.0% in Sep, the second fall in the three months and the steepest fall since January last year - signs that the stellar performance of the German industrial sector might be starting to feel the impact of an appreciating euro?
UK producer prices rose 2.1% (input), 0.6% (output) and 0.4% (core output) in Oct. On an annual basis, input prices decelerated from 8.7% to 8.0% yr, which output prices rose from 3.8% to 4.0% yr and core output was almost steady at 3.3% yr.
Canada recorded a modest 6k jobs gain in Oct but once again full-time jobs rose sharply (47k) offsetting a similar sized fall in part-time jobs. Private sector employment rose 38k but public sector jobs were down 11km and self employment was also weaker. Overall jobs growth has clearly slowed from 52k per month in the first half of 2010 to just 6k average growth in the last four months but the mostly favourable detail adds a positive spin to that otherwise slower picture. Also, building permits jumped 15.3% in Sep, reversing some of their recent downtrend with solid gains in both residential and non-res permits.
AUD/USD and NZD/USD outlook next 24 hours: There's little known event risk during our domestic sessions today. AUD is forming minor resistance at 1.0180 and may struggle above that today. NZD looks similarly capped at 0.7980 for now.
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