Friday 18 June 2010

Morning Report
Foreign Exchange Market News and views
Previous Range Todays Open Expected Risk appetite was buoyant during the European session, but fell during the US. Positive
events included a healthy Spanish government bond auction, selling 3bn of 10yr debt at
Asia Overnight 8.00am NZD cross Range Today
18bp below market yields with a coverage ratio of 1.9, as well as a smaller 30yr tranche (2.5
NZD 0.6950-0.6983 0.6952-0.7035 0.7027 0.6960-0.7050 times covered). In addition, the EU president said all members would publish bank stress tests
in July. The main negative events were the US data releases jobless claims higher, ination
AUD 0.8585-0.8652 0.8583-0.8682 0.8680 0.8096 0.8600-0.8720
low, and the Philadelphia Feds survey much weaker than expected. The S&P500 is currently
JPY 91.19-91.51 90.51-91.42 90.99 63.940 90.50-91.50 recovering towards unchanged. Commodities fell, particularly copper (-3.1%) and oil (-1.5%),
while safety asset gold rose 1.4% to around the record high. US 10yr treasury yields fell 7bp
EUR 1.2259-1.2314 1.2242-1.2413 1.2390 0.5672 1.2320-1.2420
on the US data.
GBP 1.4686-1.4806 1.4646-1.4838 1.4817 0.4743 1.4750-1.4850 The US dollar index fell in Europe from 86.50 to 85.50, but did no better than consolidate
around the lows during the US session. EUR placed more weight on the positive European
NZ Domestic Market (Previous days closing rates) news than US matters and rose from 1.2240 to 1.2410, consolidating between 1.2350 and
1.2400. USD/JPY fell from 91.30 to 90.50 on the weak US data.
Cash Curve Govt Stock Swap Rates (Qtrly)
AUD was volatile, trying to follow both the EUR and US equities (which had divergent paths),
Cash 2.75% Nov-11 3.77% 1 Year 3.80% initially rising from 0.8600 to 0.8683, collapsing back to 0.8605, and recovering to 0.8670
30 Days 2.93% 2 Years 4.32% for a net gain after Sydney closed.
Apr-13 4.37%
3 Years 4.64% NZD was less volatile, rising from 0.6950 to 0.7034 and congesting around 0.7020. AUD/
60 Days 2.99%
Apr-15 4.84% 4 Years 4.87% NZD fell further to 1.2300 before recovering to 1.2350.
90 Days 3.09% US Philadelphia Fed index fell from 21.4 to 8.0 in June, though the details werent
5 Years 5.05%
Dec-17 5.29% as alarming as the headline measure. New orders, deliveries and inventories rose, but the
180 Days 3.36% 7 Years 5.33%
employment measures turned slightly negative and prices paid plunged from 35.5 to 10.
1 Year 3.74% May-21 5.52% 10 Years 5.60% This continues the run of regional indicators that point to a slowing pace of growth in the
manufacturing sector.
World Bourses and Indices US CPI fell 0.2% in May, led by a 5.2% drop in gasoline prices. Annual ination fell from
AUD USD 2.2% to 2.0%. Core prices rose 0.1% for the month, but the annual pace remained at 0.9%,
the lowest since 1966. The shelter component remains the biggest drag on core ination,
Cash 4.50% 0.00 Fed Funds 0.00-0.25%
although it is no longer falling.
90 Day 4.87% -0.02 3 Mth Libor 0.54% 0.00
US initial jobless claims rose 12k to 472k last week, remaining stuck around levels
3 Year Bond 4.88% -0.05 10 Year Notes 3.20% -0.06
consistent with subdued private sector jobs growth (this was the survey week for non-farm
10 Year Bond 5.38% -0.07 30 Year Bonds 4.14% -0.05 payrolls). Continuing claims rose 88k to 4571k in the previous week; the downtrend remains
intact, but it may reect claims expiring rather than the unemployed nding new jobs.
NZX 50 3045.7 -20.9 CRB 263.3 -0.9 US leading index rose 0.4% in May, and Aprils small decline the rst in 13 months was
S&P/ASX200 4527.3 -31.7 Gold 1245.4 +15.5 revised away. Share prices and building permits were a drag, but money supply growth and
Nikkei 9999.4 -67.8 Copper Fut. 291.20 -6.80 the steeply positive yield curve provided support.
FT100 5253.9 +16.0 Oil (WTI) 76.80 -0.85 US current account decit widened to $109bn in Q1, an annualised 3.0% of GDP. The
S&P500 1112.0 -2.6 NZ TWI 67.57 +0.18 annual benchmarking saw sizeable upward revisions to exports and investment income
receipts, reducing the decit by $10-15bn per quarter over the last year.

Upcoming Events UK retail sales volumes rose 0.6% in May, continuing to recover from their slump at the
start of the year when VAT rose and the snow kept shoppers away from the stores. Still, the
Date Country Release Last Forecast annual pace of growth of 2.2% remains subdued.
18 Jun Jpn BoJ Meeting Minutes
UK CBI industrial trends survey fell from -18 to -23 in June. The small drop in export
Ger May PPI %yr 0.6% 0.8% orders, following a sharp improvement in May, mirrored the rise in the pound in June that
UK May Mortgage Approvals, Major Bks 47k 50k followed a steep decline in May.
May PSNCR bn 8.8 20.5
The Swiss National Bank left its Libor target unchanged at 0.25%, but noted that
May M4 Money Supply %yr 3.3% 3.2% current policy settings cant be maintained in the future without compromising medium
Can May Leading Index 0.9% 0.7% and long-term price stability. It also noted that deation risks a key motivation for its forex
21 Jun NZ May External Migration ann. 19,950 interventions in the last year have largely disappeared.
Aus May New Motor Vehicle Sales 8.4% Canadian wholesale sales fell 0.3% in April, following a 1.2% gain in March. Volumes
UK Jun Rightmove House Prices %yr 4.3% continue to rise, up 0.4% for the month, but the rising Canadian dollar depressed prices.
Can May CPI %yr 1.8%
22 Jun NZ Apr Credit Card Transactions 1.2%
US Jun Richmond Fed Factory Index 26 15 Outlook
May Existing Home Sales 7.6% 5.0% AUD/USD and NZD/USD outlook next 24 hours: Commodity currencies have performed
Apr House Prices 0.3% 0.3% well in the face of US equities weakness, suggesting small gains today are possible. AUD is
Eur Apr Current Account Balance bn 1.7 supported today at 0.8600, and could nudge higher to 0.8700. NZD is supported at 0.6950
and may see 0.7050 today.
Jun Consumer Confidence Adv 18 20
Ger Jun Ifo Business Climate Index 101.5 100.0
Imre Speizer, Senior Market Strategist, NZ, Ph: (04) 470 8266
UK Emergency Budget With contributions from Westpac Economics

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