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Westpac Global Markets Strategy Group: Morning Forex Thoughts - NZ Edition

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Fuseworks Media
Fuseworks Media
Westpac Global Markets Strategy Group: Morning Forex Thoughts - NZ Edition

US equities are currently up 0.3% after falling into the red around the weak NY Fed manufacturing survey, reports of corporate activity later offering support. The market is closely watching the S&P500's pivotal 1130 level.

The CRB commodities index, too, is at level which has been tough to break. It slipped 0.4%, oil falling 1.3% on Canada-US pipeline restoration, copper unchanged. Worth noting is the turn lower in the Baltic shipping cost indices. NZ milk powder rose 1.4% at Fonterra's fortnightly global auction. US 10yr treasury yields rose 3bp, partly undoing the rumour-fuelled rally yesterday. The Fed bought $3.9bn of treasuries of approximately 5yrs maturity.

The US dollar index stabilised around 81.50. EUR also consolidated between 1.2950 and 1.3040, preserving the large gains of the previous two days. GBP outperformed the majors, rising to 1.5652, a one-month high. After yesterday's BoJ intervention, USD/JPY finally came to a rest at 85.78 during late Europe, forming a bullish key day reversal pattern. Expectations the Fed may continue the intervention as an agent proved unfounded.

AUD slipped further after Sydney closed, to 0.9343, but then bounced with US equities to 0.9240 which contained thereafter.

NZD ranged between 0.7300 and 0.7360 during the offshore sessions. AUD/NZD largely consolidated between 1.2780 and 1.2830, a thrust to 1.2840, a four-month high, occurring an hour ago.

US NY Fed index falls from 7.1 to 4.1 in Sep but detail better. Not a significant move for this index - it can jump 10 or 15 pts in a month in either direction. Detail showed shipments improved from -11 to 0; orders -3 to 4; jobs up from 14 to 15. More evidence the economy is weak but probably not contracting.

US industrial production up 0.2% in Aug. A 5% pull-back in auto production and a further 1.5% fall in utility output was offset by a 0.5% rise in ex auto factory output. July's 1.0% rise in IP was revised back to 0.6% but the sector was clearly still expanding in the first two months of Q3.

US import prices up 0.6% in Aug. Oil was the main driver but non-oil prices rose 0.2%. Meanwhile export prices rose 0.8% last month.

Euroland core CPI steady at 1.0% yr in Aug. The headline CPI was unrevised at 1.6% yr. Also, Euroland employment was unchanged in Q2, as it was in Q1. This flat jobs picture follows six quarters of decline from mid 2008.

UK unemployment rises 2k in Aug, the first rise since January, further evidence that the economy is losing some of its surprisingly fast mid-year growth momentum. But, in the three months to July, jobs surged 286k, the fastest gain in recent history, evidence that there was a jobs dividend from the Q2 GDP growth spurt. However the jobless rate was steady at 7.8% in that period. Also, BoE governor Mervyn King addressed a trades union audience but of course gave no clues re the monetary policy outlook.

Canadian manufacturing sales fell 0.9% in July, their second month of modest decline after solid gains earlier this year, due to weaker auto shipments.

Outlook

AUD/USD and NZD/USD outlook next 24 hours: AUD should be contained by 0.9320 and 0.9460 today. NZD is unlikely to breach the major 0.7395 level today, major support around 0.7260. That's assuming no surprises from the RBNZ meeting this morning, a one or two-meeting pause and balanced statement expected.

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