Thursday 29 July 2010

Morning Report
Foreign Exchange Market News and views
Previous Range Today’s Open Expected A risk averse tone. The European open marked a peak in risk appetite, the
Asia Overnight 8.00am NZD cross Range Today ensuing slide later fueled by a weak US durable goods report, and perhaps by
NZD 0.7278-0.7337 0.7256-0.7340 0.7282 0.7220-0.7320
some elements of the Fed’s Beige Book. The latter report contained no major
surprises, describing modest increases, although two regions noted the pace had
AUD 0.8922-0.9030 0.8910-0.8976 0.8922 0.8162 0.8880-0.8960 “slowed” – the first use of the verb in that context since July 2009. The S&P500
JPY 87.63-87.98 87.40-88.12 87.46 63.69 87.00-88.00 is currently 0.8% lower. Commodities generally consolidated after yesterday’s
EUR 1.2967-1.3010 1.2974-1.3043 1.2986 0.5608 1.2920-1.3020
fall, copper (+1.0%) following China equities, although oil (-0.8%) was hurt by
reported supply increases and validated yesterday’s bearish key reversal signal.
GBP 1.5563-1.5600 1.5545-1.5638 1.5588 0.4672 1.5530-1.5630 US 10yr treasury yields fell 6bp, mainly around the Beige Book release. The 5yr
auction went well, 3.1 times bid, with good central bank presence observed.
NZ Domestic Market (Previous day’s closing rates) EU peripherals Ireland, Hungary, and Portugal had decent bond rallies after a
successful 13yr Portugese auction.
Cash Curve Govt Stock Swap Rates (Qtrly)
Cash 2.75% Nov-11 3.78% 1 Year 3.83% Safe haven currencies performed best on the day. The US dollar index held its
2 Years 4.20%
ground near the recent low. EUR, too, was undramatic ranging between 1.2970
30 Days 3.01% Apr-13 4.26% and 1.3040, a slight negative tone during the US session. USD/JPY slipped from
3 Years 4.46%
60 Days 3.12% around 88.00 to 87.30, the yen outperforming all majors.
Apr-15 4.71% 4 Years 4.65%
90 Days 3.29% AUD consolidated its CPI-related fall around 0.8950 until the US data, slipping
5 Years 4.81%
Dec-17 5.13% to 0.8908.
180 Days 3.46% 7 Years 5.08%
1 Year 3.78% May-21 5.41% 10 Years 5.35% NZD was affected by global sentiment as well as a softer NZ business confidence
reading, slipping to 0.7256. AUD/NZD retraced its decline to 1.2310 before
World Bourses and Indices settling above 1.2250.
AUD USD US durable goods orders fall 1.0% in June. The fall was largely driven by
Cash 4.50% 0.00 Fed Funds 0.00-0.25% transport, with civilian aircraft down 26% despite solid gains in Boeing’s own
90 Day 4.80% -0.05 3 Mth Libor 0.48% 0.00 orders data. However ex transport orders fell 0.6% and ex defence was down
3 Year Bond 4.70% -0.10 10 Year Notes 3.00% -0.05 0.7% so there was some underlying softness in the report, consistent with other
10 Year Bond 5.21% -0.06 30 Year Bonds 4.07% -0.02 evidence that the US economy will slow further in H2 2010. One bright spot was
the 0.6% rise in core capital goods orders in June, on top of a 4.6% rise in May.
NZX 50 3022.2 +13.8 CRB 266.2 +1.7 US Fed Beige Book for July pointed to continued modest growth, though with a
S&P/ASX200 4529.9 +32.5 Gold 1164.3 +3.5 few regions reporting a slowdown in activity. Retail and services were seen to be
Nikkei 9753.3 +256.4 Copper Fut. 324.80 +4.00 picking up, manufacturing was steady, but the housing market remains sluggish
FT100 5319.7 -46.0 Oil (WTI) 77.06 -0.40 and commercial property is very weak. Labour market conditions were seen
S&P500 1106.1 -7.7 NZ TWI 68.08 -0.28 to be gradually improving. Like the recent flow of data, this report is far more
consistent with a slower pace of growth in H2 than with a double-dip recession.
Upcoming Events German CPI rises to 1.1% yr in July, in part due to base effects related to falling
Date Country Release Last Forecast energy prices this time last year.
29 Jul NZ RBNZ OCR Review 2.75% 3.00% Canadian house prices accelerate to a 13.6% yr annual pace in May,
Jun Merchandise Trade NZDm 814 100 according to Teranet/National Bank.
US Initial Jobless Claims w/e 24/7 464k 460k
Jpn Jun Retail sales %yr 2.8% 3.2%
Eur Jul Business Climate Indicator 0.37 0.39 Outlook
Jul Economic Confidence 98.7 99.1
Ger Jul Unemployment chg, no. –21k –20k AUD/USD and NZD/USD outlook next 24 hours: AUD is showing early signs
UK Jul House Prices %yr 8.7% 7.0% of a major reversal, and should be capped by 0.9000 today. The tone of today’s
Jun Net Consumer Credit £bn 0.3 0.2 RBNZ statement (we think +25bp is a done deal, it’s certainly fully priced) will
Jun Net Lending Sec. on Dwellings £bn 1.2 1.0 determine NZD intraday direction, but further out, we note the recent peak
Can Jun Industrial Product Prices 0.3% 0.2% around 0.7400 was on waning RSI strength.
30 Jul NZ Jun Building Consents s.a. –9.6% 11.0%
Aus Jun Private Sector Credit 0.5% 0.4%
US Q2 GDP % ann’lsd 2.7% 2.5%
Q2 Employment Cost Index 0.6% 0.5%
Jul Chicago Purchasing Manager 59.1 55.0
Jul NAPM-Milwaukee 59.0 55.0
Jpn Jun Industrial Production 0.1% 0.2%
Jul Nomura PMI 53.9 – Imre Speizer, Senior Market Strategist, NZ, Ph: (04) 470 8266
Jun Unemployment Rate 5.2% 5.2% With contributions from Westpac Economics

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