Thursday 24 June 2010

Morning Report
Foreign Exchange Market News and views
Previous Range Today’s Open Expected US equities were rattled initially by weak US new home sales data and later by
a slightly downgraded outlook from the US central bank’s FOMC meeting. The
Asia Overnight 8.00am NZD cross Range Today
S&P500 is currently down 0.2%. Earlier in Europe, falls in the order of 1-2% were seen on
NZD 0.7027-0.7062 0.7028-0.7161 Ï0.7132 0.7080-0.7200 renewed sovereign credit concerns. The Greek 10yr government bond rose 57bp in yield
AUD 0.8688-0.8745 0.8661-0.8781 Ï0.8732 Ï0.8168 0.8660-0.8800 to 10.37%, a level last seen during the April/May panic. Commodities fell 1.1%, oil (-2.4%)
underperforming on surprise stockpile gains. US 10yr treasuries are 6bp lower following
JPY 90.33-90.59 89.73-90.53 Ð89.90 Ï64.120 89.00-90.50 the weaker US data and FOMC assessment. The 5yr auction was unsurprisingly tepid given
EUR 1.2244-1.2285 1.2209-1.2344 Ï1.2312 Ï0.5793 1.2250-1.2400 its timing near the FOMC, yield above market and coverage sub-par.

GBP 1.4803-1.4835 1.4815-1.4975 Ï1.4955 Ï0.4769 1.4900-1.5000 The US dollar index weakened after a spike around the weak US data. EUR fell from 1.2300
to 1.2210 around midday Europe but then rallied to 1.2340. GBP ground higher from
1.4850 to 1.4970. The UK central bank minutes revealed one vote (out of 8) for a 25bp
NZ Domestic Market (Previous day’s closing rates) hike. USD/JPY declined from 90.40 to 89.80. Norway’s central bank remained on hold at
Cash Curve Govt Stock Swap Rates (Qtrly) 2.00% but revised down its interest rate path outlook.
AUD was very choppy between 0.8660 and 0.8780 for a modest gain post Sydney. A
Cash 2.75% Nov-11 3.78% 1 Year 3.80%
leadership challenge to PM Rudd was reported, supporting AUD given his mining tax
30 Days 2.89% 2 Years 4.30% proposal.
Apr-13 4.35%
3 Years 4.61%
60 Days 2.99% NZD rose from 0.7040 to 0.7160, belatedly pricing in the day’s strong current account
Apr-15 4.82% 4 Years 4.85% report. AUD/NZD fell from around 1.2350 to 1.2220.
90 Days 3.08%
5 Years 5.03%
Dec-17 5.27% The Fed was firmly on hold again following last night’s FOMC meeting, maintaining
180 Days 3.36% 7 Years 5.30% its commitment to “exceptionally low levels of the federal funds rate for an extended
1 Year 3.74% May-21 5.50% 10 Years 5.57% period”. While the US recovery is on track, financial market conditions were seen as “less
supportive of economic growth on balance, largely reflecting developments abroad”. That
aside, minor tweaks to the description of the economy left the picture broadly unchanged
World Bourses and Indices
compared to the April meeting. Kansas Fed President Hoenig once again dissented in
AUD USD favour of dropping the “extended period” commitment, saying that it limited the FOMC’s
Cash 4.50% 0.00 Fed Funds 0.00-0.25% flexibility.
90 Day 4.94% +0.02 3 Mth Libor 0.54% 0.00 US new home sales plunged to a record low of 300k in May from a downwardly revised
3 Year Bond 4.85% -0.09 10 Year Notes 3.11% -0.05 446k the previous month. The data is somewhat distorted by the end of the government
10 Year Bond 5.35% -0.07 30 Year Bonds 4.05% -0.04 tax credits on 30 April, and while a clearer picture will emerge over the next few months as
to the underlying state of the US housing market, it doesn’t look pretty. Supply of homes
at the current rate of sales jumped to 8.5 months’ worth from 5.8 months previously.
NZX 50 3054.3 +0.1 CRB 259.7 -3.0
S&P/ASX200 4486.1 -72.2 Gold 1235.8 -5.3 German GfK consumer confidence steady at 3.5 in July, supported by the improvement
Nikkei 9923.7 -189.2 Copper Fut. 294.00 -2.40 in the labour market and an increase in World Cup-related spending.
FT100 5178.5 -68.5 Oil (WTI) 75.85 -1.28 Eurozone flash PMI composite fell to 56.0 in June, reflecting a decline in services to
S&P500 1092.0 -3.3 NZ TWI 68.48 +0.64 55.4 while manufacturing was only marginally lower compared with May at 55.6. Overall,
with the exception of the ZEW survey, confidence indicators have held up relatively well in
June and suggest a robust GDP print for Q2. This said, some of the more forward looking
Upcoming Events components appear to be turning lower which does not bode well for the second half of
Date Country Release Last Forecast this year.
24 Jun NZ Q1 GDP 0.8% 0.7% UK BoE minutes for the 9-10 June MPC meeting revealed a surprise 7-1 vote to keep
Aus Q2 Survey of Industrial Trends 56.7 – the Bank rate unchanged at 0.50% and no change to the asset purchase programme. The
US May Durable Goods Orders 2.8% –2.2% dissenter was Andrew Sentance, a well-known “hawk” who voted for a 25bp hike, arguing
Initial Jobless Claims w/e 19/6 472k 460k that it was now appropriate to gradually withdraw “some of the exceptional monetary
Jpn May Corporate Services Prices %yr –1.1% – stimulus” given the recovery in demand and sticky inflation. There also appears to be a
range of opinions forming within the Committee, with the camp split into those who see
May Trade Balance ¥bn sa 729 627
inflation risks as still balanced but highly uncertain, those who see risks skewing towards
Eur Apr Industrial Orders 5.7% –2.0%
the upside, and those still concerned with downside pressures from financial market
25 Jun NZ May Merchandise Trade NZDmn 656 600
developments.
US Q1 GDP (F) 3.0%a 3.1%
Jun UoM Consumer Sentiment (F) 75.5a 76.0 Canada retail sales dropped by 2.0% in April, the biggest fall since Dec 2008. The fall
Jpn May National CPI %yr –1.2% –1.1% in the headline number was led by new car dealerships which experienced a 5.3% fall in
receipts. Sales ex-autos were 1.2% lower on the month.
Jun Tokyo CPI %yr –1.4% –1.3%
Can G8/G20 World Leaders’ Summits
28 Jun NZ Jun NBNZ Business Confidence 48.2% – Outlook
US May Chicago Fed Nat Act Index 0.29 –
AUD/USD and NZD/USD outlook next 24 hours: AUD should be contained within
May Personal Income 0.4% 0.5%
0.8650 and 0.8800, NZD by 0.7050 and 0.7150.
May Personal Spending 0.0% 0.2%
May PCE Deflator %yr 2.0% 1.8%
Jpn May Retail Trade 0.5% – Imre Speizer, Senior Market Strategist, NZ, Ph: (04) 470 8266
UK Jun Housing Survey %yr 2.0% – With contributions from Westpac Economics

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