Market Highlights

Daily Forex Fundamentals | Written by Westpac Institutional Bank | Jun 01 09 02:02 GMT |

Australian dollar Currencies led the charge in risk on Friday, most making new 2009 highs, the USD index losing 1.3% from the NZ close. Unusually, equities were laggards, the S&P500 little changed until the last hour, closing up 1.4%. Commodities gained throughout, oil up 1.9%, copper 2.8%, and gold 2.1%, hinting of inflation concerns, and shipping charges (Baltic index) rose 5.9%,. US data was mixed, but consensusbeating Japanese IP and Indian GDP supported risk. US treasuries rallied throughout the NY session, relieved at the passing of last week's hefty $101 billion issuance, the 10yr note closing 15bp lower at 3.46%. Credit appetite continued to improve. In Sunday news, Fitch revised California's outlook to negative, in turn a negative for USD. EUR broke 1.4000 resistance and accelerated to 1.4160, consolidating around there during late NY. GBP rallied from 1.5980 (NZ close) to 1.6200. USD/JPY fell heavily from 96.50 to 95.05. AUD started a rally around noon Sydney, from 0.7860, continuing until the NY close to 0.8015. The NZD broke higher from 0.6260 near the NZ close, making a 0.6415 post Oct-08 high ahead of the Monday holiday. NZD out-performance saw AUD/NZD dip briefly under 1.25 a couple of times, but without follow-through. Economic data and events US Q1 GDP revised from –6.1% to –5.7% annualised. A relatively minor first revision to the Q1 GDP bottom line mainly reflected revisions to consumer spending (lower) and inventories (higher), plus minor tweaks to the other components. US Chicago PMI down 5.2 pts to 34.9 in May. Chicago was the one exception amongst the eight or so regional factory surveys for May released over the past two weeks: it did not post a gain, possibly given its acknowledged sensitivity to auto industry developments. Orders and jobs were the weakest components. We still expect tonight's national ISM factory index for May to post a gain to a less contractionary level - it often moves in an opposite direction to Chicago, though longer term trends in the two indices are similar. Uni of Michigan consumer sentiment was revised up by 0.8pts to 68.7 in late May; its two month gain of 11.4 pts was much less impressive than the Conference Board's confidence index gain of 28 pts in April-May. Inflation expectations were also revised higher in the UoM report. Canadian current account deficit C$9.1bn in Q1. The second consecutive quarterly CAD reflected a near zero goods trade surplus, and ongoing services and investment income deficits. The Q1 deficit is the largest on record; back to back deficits have not been seen in Canada since 1994. Euroland flash estimate of the annual CPI fell to zero this month, the lowest since the euro was introduced in 1999. Money supply growth continued to decelerate in April, and loans to the private sector grew at just 2.4% yr, it slowest on record (after three monthly declines in Feb-Apr). German retail sales posted an April gain of 0.5%, however the timing of Easter was probably a distorting factor that will be reversed in the May report. UK consumer confidence did not improve further this month but it held at April's 11 month high, not a bad result given swine flu, MP's expenses and ongoing angst about the economy. House prices posted their second rise in three months on the Nationwide measure, another positive signal. 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. The information may contain material provided directly by third parties, and while such material is published with permission, Westpac accepts no responsibility for the accuracy or completeness of any such material. Except where contrary to law, Westpac intends by this notice to exclude liability for the information. The information is subject to change without notice and Westpac is under no obligation to update the information or correct any inaccuracy which may become apparent at a later date. Westpac Banking Corporation is regulated for the conduct of investment business in the United Kingdom by the Financial Services Authority. © 2004 Westpac Banking Corporation. Past performance is not a reliable indicator of future performance. The forecasts given in this document are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts.