News and views

The USD continues to be sold and risk appetite continues to firm. Financial markets were buoyed today by a raft of positives in the last 12 hours. Stronger than expected Japanese machinery orders and China new loans buoyed risk early. JP Morgan Chase beat earnings estimate handily too giving equities and risk sentiment an added boost in US trading. Higher yielding currencies outperformed - in particular the NZD, AUD, CAD, and NOK. NZD/USD pushed from 0.7550/60 and to highs of 0.7634 and outperformance of this currency pushed the AUD/NZD to a low of 1.2980 in the European session. AUD/USD pushed up from around 0.9850 to fresh post-float highs of 0.9937.

EUR/USD rose from around 1.3950 to 1.4000 but failed to build a beach head above this big level and was sold back down to 1.3920 before stabilising near 1.3960 into the NY close. USD/JPY was rangebound between 81.75 and 81.95.

Other asset classes moved in unison to the general currency trend: commodities appreciated in general - gold +$20/oz to highs above $1374/oz while copper rose 0.9%; the S&P500 rose 0.9% to fresh six-month highs; and the US 10year bond was overall flat on the day.

US import prices down 0.3% in Sep. This reflected lower energy prices; ex energy import prices rose 0.3% as the US dollar weakened. Export prices rose 0.6% in Sep.

Japanese core machinery orders rose a surprising 10.1% in Aug. That chunky gain takes 3mth annualised growth to 25.1% from -4.8% previously and the yoy rate to 24.1% from 15.9%.

Japanese bank lending fell by 1.8% over the year to Sep, a slight improvement on August's -1.9% outcome. Bank lending at city banks is down 3.9%yr while lending at regional banks is up 0.4%yr.

Euroland industrial production up 1.0% in Aug, in line with Westpac's forecast but at the top end of expectations. Capital goods production led the way but consumer durables and intermediate goods output also rose.

UK unemployment rises 5k in Sep, its second consecutive rise after a string of falls. The report also showed slower employment growth although the jobless rate eased from 7.8% to 7.7%.

UK consumer confidence plunges in Sep. The Nationwide index fell from 62 to 53, its lowest since March last year.

Canadian new housing prices up 0.1% in Aug. This followed a small fall in July so prices have effectively stalled - another sign of lost momentum in the Canadian housing market.

Outlook

AUD/USD and NZD/USD outlook next 24 hours: A bevy of data is due in NZ today - REINZ housing prices for September, BNZ's manufacturing PMI for September and August retail sales. The market is expecting a 0.3% rise in headline retailing while Westpac looks for a fractionally softer 0.2% increase. The Westpac-Melbourne Institute survey of unemployment expectations and the MI survey of inflation expectations is due in Australia. The uptrend in both AUD and NZD remains in excellent shape. Parity is in sight for AUD. NZD should clear important 0.7635 resistance more forcefully in coming days opening the door to a run at the July 2008 highs of 0.7760+.