Forex Exchange Morning Report

Daily Forex Fundamentals | Written by Westpac Institutional Bank | Apr 14 10 01:51 GMT |

US equities opened lower, digesting yesterday's after-hours Alcoa earnings report for Q1, the fi rst of the reporting season, but have recovered to be up 0.2% at present. Alcoa shares fell 3.4% on weaker sales revenue. A closely watched Greek tbill auction was successful. Greece sold €780m 6mth tbills at a yield of 4.55% with bids for 7.7 times that amount, and €780m 12mth tbills at 4.85% with bid coverage 6.5 times (vs 3.1 times at January's auction). The total amount of €1.6bn exceeded the €1.2bn originally earmarked. The CRB commodities index co-moved with US equities, and is currently up 0.4%, oil (-0.3%) hurt by supply concerns, gold down 0.3% on reduced safe-haven appeal, but copper up 0.8% with equities. US treasuries are 3bp lower in yield, fl attening the curve similarly. The US dollar is little changed, although it did slip with the lower US trade balance release, and then bounced on a rumour of a think-tank report of Fed language changes (which the think tank reportedly denied writing). EUR roughly fl at-lined along 1.3590 +/-40 pips. USD/JPY's gyrations between 92.60 and 93.40 refl ected the dollar's reactions to the news above. AUD ranged +/-30pips around the Sydney closing level of 0.9260, and is currently a tad higher at 0.9275. NZD dipped to just below 0.7100. AUD/NZD fi rmed in a straight line to 1.3060. US small business confi dence falls further in March. The NFIB index fell from 88.0 to 86.8 in March, its lowest since July last year. This survey is a timely reminder that all is not well in the US economy. The lower reading was driven by a lower intention to hire, lower sales expectations, tighter credit and a further fall in businesses saying now is a good time to expand. Note that we have found that the intention to hire/fi re number is a good guide to the tone of the subsequent monthly payrolls so ex Census workers, we are inclined to forecast something like 0k private payrolls growth in April down from 123k in March. US trade defi cit widens from $37.0bn to -$39.7bn in Feb. This refl ected about fl at exports for the second month running, but a 1.7% rebound in imports which had fallen a similar amount in Jan. Exports were constrained by a further decline in civilian aircraft deliveries to foreign customers, while imports showed broad-based gains outside of apparel, autos and food. In other news, import prices rose 0.7% but fell excluding oil, a sign recent dollar gains against some currencies might be impacting on the trade story. US IBD/TIPP economic optimism rose from 45.4 to 48.4 in April. General economic confi dence was the highest since last September, but personal fi nances did nothing more than reverse the steep drop in March. UK trade balance defi cit narrows from £8.1bn to £6.2bn in Feb, its lowest since June 2006, thanks to a sharp jump in exports, especially of chemicals. This follows January's export slump which pushed the defi cit out to its widest since late 2008, and mirrors the recent fall/rebound in manufacturing output in the fi rst two months of 2010. Other UK data mixed. The BRC reported stronger retail sales in March, but the RICS reported fewer surveyors assessing house prices as rising in March. But back in Feb, the government reported house price gains accelerating from 6.2% yr to 7.4% yr. Canadian trade surplus widens from C$0.8bn to C$1.4bn in Feb. Exports rose 2.8% lifted by the industrial and auto sectors, while imports were constrained to a 0.9% rise by a sharp fall in the energy component. Meanwhile, new house prices rose 0.1% in Feb. Outlook AUD/USD and NZD/USD outlook next 24 hours: AUD looks rangebound today between 0.9220 and 0.9300. NZD is in a range of 0.7100 and 0.7150, but the lower bound is more likely to be tested today, particularly if our economist's -0.3% (mom) forecast for Feb retail sales proves correct this morning. Events Today Date Country Release Last Forecast 14-Apr NZ Feb Retail Sales 0.80% –0.3% Aus Apr Westpac-MI Cons Sentiment 117.3 – US Mar Consumer Price Index 0.00% 0.10% Mar CPI Core 0.10% 0.00% Mar Retail Sales 0.30% 1.20% Mar Retail Sales Ex Autos 0.80% 0.70% Feb Business Inventories 0.00% 0.40% Fed Beige Book Fedspeak Eur Feb Industrial Production 1.60% 0.00% 15-Apr Aus Apr WBC-MI Unemploy Expect’s –0.2% – Apr MI Inflation Expectations 3.20% – Q1 NAB Business Survey US Initial Jobless Claims w/e 10/4 460k 440k Apr NY Fed Empire State Index 22.9 25 Feb Net Long Term TIC Flows $bn 19.1 48 Mar Industrial Production 0.10% 0.80% Apr Philadelphia Fed Index 18.9 22 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. 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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.