Forex Exchange Morning Report

Daily Forex Fundamentals | Written by Westpac Institutional Bank | Oct 14 08 01:30 GMT |

News And Views

The US (partial) holiday helped produce less frenetic trade in London/NY, particularly with so much of the news flow on government support for the financial system being deliberately announced before the European open. USD surrendered some of its recent gains as safe haven demand waned. The DJ EuroStoxx 50 closed up 11% and in afternoon 'holiday' trade, the DJIA had risen 500pts (6%). NZD/USD recovered from its early London sell-off to spend much of its time range-trading 0.6030-0.6100.

AUD/USD chopped around 0.6700-50 for some time then extended to the 0.6800 area in the NY afternoon as the DJIA consolidated its gains.

EUR/USD traded as high as 1.3680 in London but retreated once again to the low 1.35s seen in late Asia. Germany confirmed its financial rescue plan totalling EUR400bn in loan guarantees and EUR70bn in bank recapitalization.

USD/JPY looked comfortable with the 100 handle until the NY afternoon when it probed above 101 on improved risk sentiment.

No US data. Columbus Day holiday.

European governments take action to support the banking sector. In the UK, the government took majority equity holdings in several of the major banks and similar action on the continent meant that implementation of the weekend's somewhat vague commitment to bolster the banking sector has been impressively quick.

UK producer prices fall further in Sep. The core output measure fell from 5.6% yr to 5.4% yr, and the previous data saw substantial downward revisions. CPI inflation figures for Sep are due out tonight and will likely show further acceleration, but with factory price pressures now easing, the CPI should follow suit later this year.
Outlook

At the margin, the lack of long NZD longs to be unwound still helps the currency versus AUD during risk aversion surges and vice versa. NZD/USD direction remains tied to USD safe haven demand which we are inclined to see waning in coming weeks after the slew of aggressive government action.

Events Today
Country Release Last Forecast
Aus Sep NAB Business Survey –3 –
US Oct IBD/TIPP Economic Optimism 45.8 42
Sep Federal Budget $bn –111.9 63.5
Jpn Sep Corp. Goods Prices %yr 7.20% 6.60%
Sep Consumer Confidence 30.5 29.9
Eur Aug Industrial Production –0.3% 1.20%
Ger Oct ZEW Analysts' Survey –41.1 –65.0
UK Sep CPI %yr 4.70% 5.00%
Aug House Prices %yr –0.3% –1.1%
Can Aug Auto Sales –0.8% –1.0%

Westpac Institutional Bank
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