US Treasury Secretary frightens markets briefly. CNBC comments from Geithner were initially
reported as supporting China's suggestion that SDR's (Special Drawing
Rights) replace USD's as the world's main reserve currency. It was later
acknowledged as a case of misreporting, the comments taken out of context, but
the markets had already been spooked. The S&P500 opened strongly, but faded
throughout the session, and is down 1.4% currently. Another contributor to the
downbeat mood was the poorly received US 5yr treasuries auction, the 10yr
weakening by 6bp on a record weekly supply. The Fed's bond purchases only
partly stemmed the rise in yields. Oil fell 2.4% on continuing worries about
building inventories, and copper followed risk sentiment, down 1%. Norway cut its policy rate 50bp to 2.00%, and implied
a lower trough than the market expected.
NZD continued the domestic softening to 0.5550,
followed by a Geithner inspired rally to 0.5720, and is settling around 0.5650
this morning. There is only light pre-positioning ahead of today's current
account report, tomorrow's GDP the main event.
AUD had a volatile evening, spiking both ways, to
0.69 and 0.7050, but is only slightly weaker this morning at 0.6955. AUD/NZD
saw some extremes, 1.2490 and then 1.2285, settling at 1.2340.
EUR strengthened from 1.3420 to 1.3650. GBP
went the other way, from around 1.47 to 1.45, a partial failure of the gilt
auction responsible. USD/JPY was relatively stable, drifting lower from
98 to 97.50.
US durable goods orders jumped 3.4%
in February against an expected
2.9% decline, the first increase since July last year. January was revised
substantially lower, but the two months taken together were still stronger
than expected at -3.9% rather than -7.7%. The revised pattern of a very large
fall in January followed by an increase in February was despite swings in
civilian aircraft orders in the opposite direction. Defence orders contributed
to this month's increase, but there was also a broad-based increase in
non-defence durable goods orders. Shipments continued to fall in Feb,
consistent with past orders weakness. Inventories declined for the second month
running, adding to the sense that conditions are not quite as weak as
US new home sales were up 4.7% in
Feb to 337k, the first increase
since July last year. The inventory of unsold homes fell to a six-year low of
330k, although in this market that's 12.2 months' supply. This is the last
piece in the puzzle for February housing activity data, which has also featured
surprise increases in existing home sales, housing starts, and housing permits.
The US housing market has clearly improved in
February, as buyers have (finally) been attracted by low prices and mortgage
rates. Yesterday's FHFA house price data for January even suggested some relief
from falling prices, although we await the Case Schiller Index for confirmation
Japan trade continues to contract. The February trade showed exports declined 5.6%
in the month to a 49.5%yr annual decline. The annual pace was a shocking
-45.7%yr in January. Combined with a -42.7%yr slide in imports this
resulted in a partly-seasonal swing to JPY82bn trade surplus from record
-JPY953bn deficit in January.
German IFO business confidence fell
further to 82.1 in March, a new
26 year low. The assessment of current conditions fell 1.6 points, notable
given the extent of weakness in Jan and Feb. This was partially offset by
reduced pessimism around future expectations, possibly something of a base
UK CBI distributive trades survey fell to -44 in
March, returning to extreme
weakness after a brief respite in February.
The past 24 hours has seen 2 selloffs and 2
rallies, in a range of almost 2 cents. We take this as sign of market
uncertainty, which means positions are unlikely to be as skewed as they have
been during the past few months. Today, we favour a test of the lower end of
the range (0.5550), followed by another leg higher next week, past 0.5750. Much
longer term, we expect to see NZD under 0.50 by mid year.
Q1 Consumer Confidence (25 March)
Weekly Forex Outlook (23 March)
Q4 Current Account Preview (20 March)
Q4 GDP Preview (18 March)
Weekly Forex Outlook (16 March)
RBNZ March MPS Review (12 March)
Q4 Terms of Trade (11 March)
papers/publications are available on Online Research on Westpac
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