Tuesday November 9, 2010 - 19:31:06 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report (Westpac)
Morning Report Wednesday 10 November 2010
News and views
US equities consolidated near the recent high in the absence of any significant news to provide fresh impetus. The S&P500 is currently down 0.2%, banks (-1.3%) underperforming. Irish sovereign credit negative momentum seemed to slow, its 10yr government bond underperforming Germany's by a smaller 6bp, and the Irish equity index up 2.0%. The ECB reportedly intervened in the peripheral's bond markets. The CRB index gapped 1.5% higher to yet another fresh two-year high, gold (+0.7%) making a new record of $1425/oz, but silver (+4.6%) stealing the show. US 10yr treasuries (+7bp to 2.62%) were sold again, the auction mixed with weaker bidding overall but strong offshore interest.
The US dollar index mimicked US treasury yields and rose for the third consecutive day. EUR made a week low of 1.3824 during early Europe, briefly bouncing to 1.3974 late session before fully retracing. Underperformer GBP fell from an intraday high of 1.6184 to 1.6020, rumours of a weak leaked inflation print circulating. USD/JPY surged in NY from 80.55 to 81.40.
AUD has been choppy and consolidative since the domestic session, between 1.0074 and 1.0174, currently near the lower bound.
NZD made a week low of 0.7805 early Europe and then bounced to 0.7913 before heading back towards the low. AUD/NZD ground higher to 1.2934 before settling above 1.2850, the kiwifruit disease outbreak possibly supportive.
US NFIB small business survey up from 89.0 to 91.7 in Oct, its second highest reading for 2010 after May's 92.2. The intention to hire index which fell 4 points in Sep bounced back 4 points to 1, its second highest reading for the year as well, after July's 2. That bounce means the weak jobs signal from this important sector last month has not been confirmed and removes a reason to expect Oct's stronger than expected payrolls outcome to be reversed or revised lower.
US IBD/TIPP economic optimism edges up from 46.4 to 46.7 in Nov, its third straight gain, driven by a slight improvement in the economic outlook and a less unfavourable assessment of Federal policies. However personal finances dipped to a three month low, preventing a bigger headline rise.
US wholesale inventories jumped 1.5% in Sep, their third straight monthly gain of more than 1%, although higher petroleum prices were a key supporting factor.
The adjusted Japanese current account widened sharply to JPY1661bn in Sep, from JPY1179bn in Aug. This was above expectations. Exports rose 2.3% in Sep while imports fell 1.6%, leaving the trade balance at JPY702bn. Also, total bank lending fell by 1.9% over the year to October. Lending by city banks fell by 4.3% while lending by regional banks rose by 0.4%.
UK industrial production up 0.4% in Sep. The third straight gain in IP was consistent with the solid contribution from the sector to Q3 GDP growth, although factory output was up just 0.1%, the difference coming from mining, oil and utilities. Also in Sep, the trade deficit narrowed from GBP8.5bn to GBP8.2bn thanks to stronger export growth (2.2%) than import growth (0.5%).
UK BRC retail monitor showed same store sales accelerating from 0.5% yr to 0.8% yr in Oct, still quite soft. This series has lagged well behind the CBI retail survey but accurately warned of the slower official retail sales figures recently. Meanwhile, a net balance of 49% of surveyors reported falling UK house prices in the latest RICS survey, the most bearish since April last year.
Canadian new house prices up 0.2% in Sep. That is the least weak outcome since May, and follows other data showing stronger building permits last week. We'll need to see strength in other housing data before concluding the sector is turning the corner again.
AUD/USD and NZD/USD outlook next 24 hours: Australian consumer sentiment and housing finance provide second-tier event risk for the AUD today. Minor support at 1.0070 is now under threat, the next level being 1.0000. NZD is also in corrective mode, and a break below 0.7800 opens 0.7690 and then 0.7640.
.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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