Monday March 29, 2010 - 19:26:41 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report
Morning Report Tuesday 30 March 2010
News and views
US equities gained moderately, US consumer spending data meeting consensus, and some ongoing relief a solution had been reached for Greece, likely contributing factors. Days after the EU/IMF agreement, Greece managed to successfully issue EUR5b of 5yr bonds (at swap +310bp), pre-funding all of April's requirements according to Greece's debt office. The US Treasury has arranged to sell its rescue stake in Citigroup over 2010, and could earn $8bn at current market prices. The S&P500 is 0.5% higher. Commodities surged on stronger equities and a weaker dollar, oil up 3.0%, copper up 4.0% (to a whisker from the 2010 high), and safe-haven gold unchanged. US treasuries continued to consolidate, the 10yr adding 2bp for a commensurate steepening.
The US dollar index fell further to 81.20, a casualty of the positive market tone. EUR rallied from around 1.3420 to just above 1.3500 and then consolidated around 1.3460. Industrial and consumer surveys were supportive. USD/JPY was stuck in a 92.40-92.70 range.
AUD was boosted from 0.9080 to almost 0.9170, additional support coming from journalist McCrann's prognosis that a 25bp RBA hike was likely in April, founded upon the tone and timing of RBA Governor Stevens' pre-recorded television interview.
NZD rose from 0.7070 to almost 0.7120, running out steam to slip to 0.7080. AUD/NZD bounced accordingly from 1.2840 to 1.2930, and formed a bullish key reversal day.
US core PCE deflator flat in Feb, again. Two flat core PCEs in a row (actually Jan was a small negative like the Jan CPI) adds weight to the view that the huge output gap is imparting downward pressure on prices despite strong-looking GDP growth. This will keep the majority at the FOMC on hold for quite some time yet - as Fed officials including Ben Bernanke and Janet Yellen have been telling us time and time again. The report also showed income growth failing to exceed spending growth for the fifth month running, pushing the savings rate down to 3.1%, its lowest since October 2008 (and well down on the 6.4% peak in May last year). US consumers seem to be regaining their inclination to spend, although we are still a long way from the 0.8% savings rate low earlier in 2008.
US Dallas Fed factory index up from -0.1 to 7.2 in March. Sharply stronger in both the headline and the detail, with the jobs component turning positive again for the first time this cycle.
Euroland EC business surveys all rise in March. Once again all of the Euroland business confidence surveys continued to improve in March, although it remains to be seen whether that translates into stronger hard activity data - so far the evidence has been mixed at best.
German inflation 1.1% yr in March. The CPI picked up more sharply than expected in March, with the state reports pointing to fuel, transport and food as the main drivers. This suggests upside risk to our 0.9% yr forecast for the flash estimate of March Euroland CPI (due 31/3).
UK household credit growth picked up in February, both for consumer (GBP0.5bn) and mortgage (GBP1.6bn) purposes, although the number of new mortgages continued to decline modestly. Viewed in a historical context, though, household credit growth remains very weak: just a few years ago, consumer credit was growing by in excess of GBP2bn every month and mortgage credit by around GBP10bn.
AUD/USD and NZD/USD outlook next 24 hours: The solid move overnight in the AUD leaves it stretched intraday, so that a small pullback is likely before an attempt on 0.9200. NZD should be supported today at 0.7020, and attempt beyond 0.7120.
Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 14 November 2007. 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 Westpac'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 regulated for the conduct of investment business in the United Kingdom by the Financial Services Authority. Â© 2004 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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