Wednesday 21 July 2010

Morning Report
Foreign Exchange Market News and views
Previous Range Today’s Open Expected US equities were initially stung by weak US housing starts and a
Asia Overnight 8.00am NZD cross Range Today disappointing Goldman Sachs earnings report, the S&P500 gapping lower
NZD 0.7046-0.7130 0.7079-0.7161 Ï0.7158 0.7100-0.7200
at the physical open but rebounding thereafter to be up 1.1% currently. The
rebound was attributed to rumours the Fed may embark on a new quantitative
AUD 0.8668-0.8786 0.8712-0.8835 Ï0.8833 Ð0.8104 0.8760-0.8860 easing program by reducing the interest payment on excess reserves from 25bp
JPY 86.66-87.19 86.70-87.32 Ï87.48 Ï62.62 87.00-88.00 to zero, effectively channeling those funds into the market. CNBC later quashed
EUR 1.2927-1.2975 1.2839-1.3029 Ð1.2889 Ï0.5554 1.2840-1.2940
the rumour. Commodities are little changed overall, although fast movers
oil (+1.2%) and copper (2.6%) outperformed after equities turned. US 10yr
GBP 1.5212-1.5270 1.5154-1.5310 Ï1.5274 Ï0.4686 1.5220-1.5320 treasuries are unchanged on the day at 2.95%, although they did reach a yield
low of 2.89% in line with the early equities weakness.
NZ Domestic Market (Previous day’s closing rates) Commodity currencies outperformed on the day. The US dollar index is little
Cash Curve Govt Stock Swap Rates (Qtrly) changed having gained during equities’ weakness and softened on the later
Cash 2.75% Nov-11 3.77% 1 Year 3.81% bounce. EUR peaked around the Sydney close at 1.3029 and plunged to 1.2839
2 Years 4.22%
before risk appetite stabilized it around 1.2900. USD/JPY rose from the 0.8700
30 Days 2.97% Apr-13 4.26% area to 87.50. CAD is a cent stronger on the day at 1.0480, and formed a bullish
3 Years 4.47%
60 Days 3.08% outside day despite the earlier 40 pip selloff on the Bank of Canada’s growth
Apr-15 4.72% 4 Years 4.66%
90 Days 3.23% downgrade accompanying its widely expected 25bp hike to 0.75%.
5 Years 4.81%
Dec-17 5.13% Outperformer AUD left Sydney around 0.8800 and declined to 0.8713 until risk
180 Days 3.44% 7 Years 5.08%
1 Year 3.77% May-21 5.38% 10 Years 5.35%
markets turned, currently at the day’s high of 0.8839.
NZD fell to 0.7080 but followed sentiment higher to 0.7164. AUD/NZD nudged
World Bourses and Indices higher from 1.2300 to 1.2350.
AUD USD US housing starts fall 5.0% in June, beyond market expectations for a 2%
Cash 4.50% 0.00 Fed Funds 0.00-0.25% fall but not as far as Westpac’s expectations of -8%. Markets were expecting a
90 Day 4.84% -0.01 3 Mth Libor 0.51% -0.01 fall in housing starts, following the end of the tax credit earlier this year. The fall
3 Year Bond 4.73% +0.12 10 Year Notes 2.95% -0.02 hasn’t been in line with home sales, and we anticipate further weakness into the
10 Year Bond 5.23% +0.11 30 Year Bonds 3.98% -0.01 summer months.
UK public sector net borrowing £14.5bn for June. After improving relative to
NZX 50 2995.4 +30.8 CRB 261.5 +0.3 analyst’ forecasts over the past two months, the June figures exceeded market
S&P/ASX200 4403.6 +45.3 Gold 1191.7 +8.3 expectations of £13.0bn. The May figures were also pulled higher from £16.0bn
Nikkei 9300.5 -107.9 Copper Fut. 299.95 +6.05 to £17.1bn but after adjusting for monthly gyrations the trend of greater monthly
FT100 5139.5 -8.8 Oil (WTI) 77.30 +0.79 borrowing requirements looks to have steadied.
S&P500 1082.2 +10.9 NZ TWI 67.33 +0.80
UK mortgage approvals fell to 48k from 51k in June. Mortgage approvals
eased relative to market expectations and there has been no growth in approvals
Upcoming Events for all of 2010. That said, monthly approvals remain elevated relative to their
Date Country Release Last Forecast trough of 35k in January 2009.
21 Jul NZ Jun External Migration Ann. 17,970 16,900 Bank of Canada raises overnight lending rate by 25bps to 0.75%, as
Jun Credit Card Transactions s.a. 1.9% – expected. The decision was not contentious for the markets yet the related
Aus May Leading Index, ann’lsd 7.6% – statement may have been a surprise to some. The BoC statement was less
US Fed’s Bernanke semi-annual testimony hawkish in tone than in April – it noted that the domestic economic recovery was
UK BoE MPC Minutes ‘more gradual’ than was expected at the April review and pointed to rebuilding
Can May Wholesale Sales –0.3% 0.4% of balance sheets as reasons for a slower global growth. The BoC’s inflation
22 Jul US Initial Jobless Claims we 17/7 429k 445k
forecasts were not materially changed. The bank reiterated that ‘considerable
Jun Existing Home Sales –2.2% –15.0%
monetary stimulus’ remains and restated that taking away of this stimulus will
Jun Leading Indicators 0.4% –0.3%
depend on ‘domestic and global…developments’.
Jpn May All-Industry Activity Index 1.8% –0.4%
Eur Jul PMI Manufacturing Adv 55.6 56.0
Jul PMI Services Adv 55.5 55.0
May Industrial New Orders 0.6% –0.3%
Outlook
Jul Consumer Confidence Adv –17 –18 AUD/USD and NZD/USD outlook next 24 hours: The strong US equities
UK Jun Retail Sales W/Auto Fuel 0.6% 0.5% close should be initially supportive. AUD resistance today lies overhead in the
Can May Retail Sales –2.0% 0.5% 0.8850-60 area. NZD should similarly be capped by the 0.7160-00 area.
BoC Monetary Policy Report
23 Jul Aus Q2 Export Price Index %qtr 3.8% 15.0%
Q2 Import Price Index %qtr 0.3% 2.4% Imre Speizer, Senior Market Strategist, NZ, Ph: (04) 470 8266
Eur Committee of Euro Banking Supervisors With contributions from Westpac Economics

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