Wednesday December 8, 2010 - 20:38:58 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report (Westpac)
Morning Report Thursday 9 December 2010
News and views
Continuing reaction to the US fiscal stimulus announcement (tax cuts etc) on Tuesday pushed US yields significantly higher, helping the US dollar and depressing risky currencies. The 10yr Treasury note's yield rose another 19bp yesterday to 3.33% - a six month high. Additional yield supportive factors included stronger Eurozone and UK manufacturing data, positive initial voting for Ireland's budget cuts, stabilising peripheral Eurozone debt markets, and a poor German government bond auction (bunds rose 8bp to a 7 month high yield). Bargain hunters supported the US 10yr auction somewhat, which went at 3.34% with a 2.9 bid-cover ratio. The S&P500 is up 0.2%, the price action consolidative. Commodities are mixed, the CRB index up 0.3%, oil -0.4%, gold -1.3%, but copper outperforming at +1.3%.
The US dollar again benefited from the rise in US treasury yields, but only until early Europe, consolidating thereafter. EUR's recent decline continued a little further, to 1.3180 during Europe's morning, but then consolidated between 1.3200 and 1.3250. USD/JPY continued its rise to 84.30, yield differentials helping.
AUD slipped further from Sydney's close at 0.9790 to 0.9753 in a volatile session.
NZD underperformed all, the RBNZ meeting today possible weighing, and reached an intraday low of 0.7458. AUD/NZD rose from 1.3000 to 1.3095.
No US data to report.
German industrial production rose 2.9% in Oct, easily reversing Sep's 1.0% fall. The Oct gain was broad-based across capital goods, consumer durables and intermediate product.
UK business surveys show prices softer, factories stronger. The BRC reported that shop price inflation eased from 2.2% yr to 2.0% yr in Nov, often a guide to the direction of change in the official CPI annual pace. The CBI industrial trends survey for Dec showed new orders improving from -15 to -3, mostly due to exports.
Japanese current account declined to JPY1463bn in October, from JPY1661bn in September. Exports rose 0.7% in the month but imports rose by 2.1%; investment income declined by 4.5%.
Japanese core machinery orders declined by 1.4% in October, but remain 7% higher over the year. The decline in October was the result of a 8.7% decline in orders from non-manufacturers; manufacturer orders were up 1.4% in the month and public and foreign orders also rose.
Japanese pace of decline in new bank lending was unchanged at -2.0%yr in Nov and was the result of 4.6%yr decline in lending by city banks; lending at regional banks is 0.6% higher than a year ago.
Canadian housing starts rise 11.6% in Nov. This comprised a 5.5% rise in single family starts (first significant gain after falling 36% since March 2010). Multiple starts jumped 20.9% after a similar fall in October.
AUD/USD and NZD/USD outlook next 24 hours: Major events for the markets today are the Australian employment report (unemployment expected to decline from 5.4% to 5.2%) and the RBNZ's Monetary Policy Statement. AUD has support at 0.9750 and 0.9700, and should bounce to 0.9850 barring surprises. Similarly, NZD should bounce to 0.7600 on a neutral RBNZ, while a dovish outcome would test 0.7400.
Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 9 December 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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