Monday November 8, 2010 - 20:27:09 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report (Westpac)
Morning Report Tuesday 9 November 2010
News and views
Eurozone sovereign debt jitters took centre stage in the absence of any significant news for markets. These concerns have been present since mid-year, but have intensified over the past week with the EU's Budget assessment of Ireland, fears Greece would back away from earlier fiscal commitments, and less lenient treatment proposed by Germany for bondholders. Last night the Irish Tribune opined Ireland was on the brink of a bailout. Irish (+25bp) and Portuguese (+20bp) 10yr government bonds were sold heavily last night, while Germany's rallied 3bp. For all that, European closed only slightly lower (-0.3%), and US equities are currently down by the same. Commodities (CRB +0.6%) pressed on to a fresh two-year high, silver (+3.3%) making another fresh 30-year high. US 10yr treasuries were little changed, shorter maturities slightly weaker although the 3yr auction was well bid. In Fedspeak, Bullard defended the recent QE2 program, saying it will have a conventional 6-12 month lagging effect.
The US dollar index continued Friday's bounce, gaining 0.5% on the day. The EUR recorded a commensurate loss, although most of that was during Asia, Europe taking it further from 1.3950 to 1.3887 but NY reversing it to 1.3950. Safe-haven yen outperformed, USD/JPY holding a narrow 81.00-81.35 range overnight.
AUD minor support at 1.0080 held, the NY rebound taking it back to 1.0140 for little net change.
NZD underperformed, unsurprising since it was the top performing currency since mid-September, falling to 0.7842 before rebounding in NY to 0.7900. AUD/NZD ground a little higher after Sydney close to 1.2860.
Fed's Senior Loan Officer Survey found a further easing in loan standards and terms in Q4, though not surprisingly many banks felt that standards "would not return to their longer run averages for the foreseeable future". Large banks reported higher demand for commercial real estate loans, but elsewhere demand for business and household loans was seen to be weaker.
German industrial production fell 0.8% September. This survey is very choppy even on a seasonally adjusted basis, and followed a 1.5% rise in August. Year-on-year growth slowed to 7.9% - still a respectable pace, but down from the peak of 13.7% in April.
German trade surplus rose to EUR15.6bn in September, due to a 3% rebound in exports and a 1.5% drop in imports. The weakening of the euro through the first half of 2010 was clearly of immense benefit to the German economy; the rebound in the currency since June is likely to be reflected in the data in coming months.
Eurozone Sentix investor confidence rose from 8.8 to 14.0 in November, its highest in three years. The core economies are still reporting reasonable growth momentum, but euro strength and sovereign debt concerns will soon come to the fore again.
Canada housing starts fell 9.2% in October, accelerating the decline that began mid-year. The fall has been most pronounced in standalone houses in urban areas, down nearly 40% since March.
AUD/USD and NZD/USD outlook next 24 hours: Today's NAB business survey poses minor event risk to the AUD, the currency likely to be rangebound between minor levels 1.0080 and 1.0180. NZD looks similarly rangebound between 0.7840 and 0.7980.
.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
financial services guide by calling +612 9284 8372, visiting www.westpac.com.au or visiting any Westpac Branch. The information may contain material provided directly by third parties, and while such material is published with permission, Westpac accepts no responsibility for the accuracy or completeness of any such material. Except where contrary to law, Westpac intends by this notice to exclude liability for the information. The information is subject to change without
notice and Westpac is under no obligation to update the information or correct any inaccuracy which may become apparent at a later date. Westpac Banking Corporation is registered in England as a branch (branch number BR000106) and is authorised and regulated by The Financial Services Authority. Westpac Europe Limited is a company registered in England (number 05660023) and is authorised and regulated by The Financial Services Authority. Â© 2010 Westpac Banking Corporation. Past performance is not a reliable indicator of future performance. The forecasts given in this document are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts.
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