Risk aversion fades slightly ahead
of Fed. FX markets
unwound a bit of risk aversion overnight, helped by better US data, as traders
prepared for Q1 GDP and the Fed. US consumer confidence came in well above
expectations helping trades like NZD/JPY and AUD/JPY recover at least some of
the lost ground. However, nervousness over the banks remained with both Citi
and BoA under pressure.
NZD traded down around the 0.5530 level in Sydney only to recover some ground to around 0.5620.
The picture was similar for the AUD
hit a low of 0.6990 during the Sydney session but never really came close to
re-testing that level over night. In NY it hit a high of 0.7102.
EUR/USD dipped as low as 1.2964 in the London morning but rallied steeply in NY, with DXY
losing safe haven demand in part on the better than expected data. Along with a
slight easing in the pace of house price decline in Feb, EUR/USD got a further
kick along from consumer confidence, which was well above even the bullish market
rumours. EUR/USD pushed to the high 1.30s then again in late NY to 1.3150. Not
surprisingly, the yen lost some allure, with USD/JPY bouncing from 96.00
in London to the 96.60 area before easing slightly.
US Richmond Fed factory index up from -20 to -9 in April. The Richmond Fed factory index, like NY,
Philly and Dallas before it, found less pessimism this month. The
headline improvement was significant, and the detail showed a much slower pace
of decline in new orders and shipments. However the jobs component remained
very weak, as was the case in the other regional surveys. The Richmond Fed's
separate services survey slipped from -28 to -29 in April, so diminished
industrial sector pessimism does not seem to have spread to the services sector
US consumer confidence up 12.3 pts in April. The Conference Board's consumer confidence
index jumped sharply this month, though the gain was almost entirely due to
expectations, which often track fairly well with the equity market, which has
risen 500 points (Dow) since the March survey. The latest tax cuts may also
have helped. The current component of the index rose only slightly, held down
by a still very pessimistic view of the labour market.
US S&P Case Shiller House Price
index fell 2.2% in Feb after falling
2.8% in January. Positive spin: the first monthly decline in eight months not
to be steeper than the previous month's decline; negative spin: the fifth
consecutive monthly decline of over 2%. The annual pace of decline moderated
from -19.0% yr to -18.6% yr, which is the first rise in the annual rate since
November 2005; it reflected a 2.6% fall in prices in February last year
dropping out of the annual calculation. So as with some of the other US housing
data, even prices are falling at a less rapid pace but it would be fanciful to
suggest that the US housing market is about to turn - the supply overhang
remains a huge impediment to new activity and actual price gains. Further,
rising unemployment will continue to dampen the market for some time to come.
Japan retail sales fall 1.1% in March, the sixth successive monthly decline. Despite
this, the through the year fall in spending moderated from the 5.7% recorded in
Feb to -3.9%. The result was well below consensus expectations of a 0.4%
decline but in line with Westpac's expectation of a 1% fall.
German CPI accelerated slightly to
0.7% yr in April despite a flat
monthly result for April, because a 0.2% fall in April 2008 dropped out of the
UK CBI retail survey up from - in April. The first positive reading since March last year, but the CBI
explained that the relatively late Easter boosted the outcome substantially. If
the CBI is correct then the May survey should be sharply weaker again.
We expect to see further weakening in the NZD
into the RBNZ meeting on Thursday.
Country Release Last Forecast
29 Apr NZ
Mar Merchandise Trade NZDmn 489 450
Business Confidence β39.3% β
US Q1 GDP
Advance % Annualised β6.3% β5.0%
Decision 0.25% 0.25%
Money Supply M3 %yr 5.9% 5.7%
PMI 44.1 β
Climate Index β3.58 β3.60
Confidence 64.6 64.3
Confidence β34 β35
30 Apr NZ
RBNZ OCR Review 3.00% 2.50%
Consents s.a. 11.6% 0.6%
β’ NZ Weekly
Forex Outlook (27 April)
β’ RBNZ OCR
Preview (23 April)
β’ NZ Weekly
Forex Outlook (20 April)
β’ NZ Q1 CPI
Review (17 April)
β’ The money
tree (17 April)
β’ NZ Weekly
Forex Outlook (14 April)
papers/publications are available on Online Research on Westpac
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Tue 19 June 2018 A 12:30 US- House Permits/Starts Wed 20 June 2018 A 14:00 US- Existing Homes Sales A 14:30 US- EIA Crude Thu 21 June 2018 AA 11:00 GB- Bank of England Decision A 12:30 US- Weekly Jobless Fri 22 June 2018 AFlash PMIs
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