Forex Exchange Morning Report

Daily Forex Fundamentals | Written by Westpac Institutional Bank | Sep 24 08 01:22 GMT |

News And Views Markets spent a good portion of the London/NY overlap watching Fed's Bernanke and Treasury's Paulson explain to sceptical politicians why it was essential their rescue plan is passed quickly with few changes. There were few other distractions and no resolution on the day, leaving USD Index little changed to a touch firmer. Equities started optimistically but weakened, DJIA sitting -150pts in late trade. Financial stocks were generally soft but nowhere near as volatile as on previous days. NZD/ USD was quiet around 0.6900 until a downturn in US equities pulled it as low as 0.6780, then returning to 0.6825. AUD/USD fell more than a cent as the DJIA turned gains to sizeable losses, with lows under 0.8300 and late NY levels around 0.8365. EUR/USD traded a range of roughly 1.4625 to 1.4800, sitting around 1.4700 in late NY. The German IFO survey of business sentiment will be closely watched later today. USD/JPY was quieter than usual, bumping around with a 105 handle and no real direction. US Richmond Fed index weaker across the board in Sep. The Richmond Fed survey showed further weakness in manufacturing, retailing and services. This contrasts with the stronger Philly Fed factory survey released last week, possibly because more Richmond respondents submitted their surveys in the light of last week's financial market turmoil. US house prices fell for the fifth month running in July on the little watched OFHEO measure, which appears to way understate the extent of house price decline compared to the more closely watched National Association of Realtor and S&PCase Shiller series. US weekly retail reports were soft. Chain store sales fell 1.0% in the week ended 19/9, a further decline following the hurricane impacted 1.6% fall in the prior week. The Redbook retail average slipped from -1.1% to -1.2%. Fed chair Bernanke, Treasury Secretary Paulson, SEC chair Cox and Federal Housing Finance Agency chair Lockhart were grilled by a mostly hostile Senate Banking Committee last night regarding the proposed $700bn public fund to purchase the toxic waste accumulated by the US banking system. Euroland PMI advance readings soft in Sep. Both the services and factory PMIs fell further below 50 in September, another strong signal that Euroland GDP growth will contract in Q3, on top of Q2's 0.2% pull-back from Q1's growth spurt. That would, of course, confirm that Euroland is in recession. Backing that message, French spending figures showed a subdued consumer through the summer; and Belgian business confidence slumped to its lowest since 2003. However there was a surprise 1% rise in Euroland orders back in August, although the strength was concentrated in transport (so it could be a lumpy Airbus order going through). Ex transport, orders fell 1.4% in August. The British Bankers' Association reported just 21.1k new mortgages in August, down from 22.5k in July and 54.6k a year earlier. Canadian headline inflation accelerated further to 3.5% yr in Aug, despite gasoline prices falling. The main reason was a step up in core inflation to 1.7% yr, its highest yet this year, it remains below the mid-point of the 1-3% target band. Outlook NZD/USD remains prone to US-driven volatility but our bias is towards underlying decline ahead of what should be poor NZ GDP data on Friday. AUD/NZD remains a buy on dips. Events Today Country Release Last Forecast NZ Q3 Consumer Confidence 81.7 – US Aug Existing Home Sales 3.10% flat Fed Chair Bernanke testimony before Joint Econ Committee Jpn Q3 BSI Large All–Industry %qtr –15.2 – Q3 BSI Large Manufacturers %qtr –15.1 – Eur Jul Current Account €bn –8.2 – Ger Sep Ifo Business Climate Index 94.8 95.2 UK Sep CBI Retail Report, net bal % –46% – Westpac Institutional Bank http://www.wib.westpac.co.nz/ Disclaimer 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. 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