Wednesday June 13, 2012 - 20:28:17 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Westpac Morning Report
Morning Report Thursday 14 June 2012
Markets remained nervous ahead of Sunday’s Greek election. There was little fresh news from Europe, Greece’s anti-austerity party leader again calling Germany’s bluff by saying he intends reneging and renegotiating the existing bailout’s terms if elected, believing the Eurozone wishes to avoid a Greek exit. In the US, economic data (retail sales, PPI) disappointed, helping the S&P500 flip from being up 0.5% to being down 0.8% (currently). Commodities were weaker, the CRB index down 0.6%, oil -1.0%, copper -0.5%, but gold acting as a safe haven since mid-May up 0.5%. US 10yr treasury yields reversed during the London morning from 1.70% to 1.59% by the NY afternoon. The 10yr auction went well at 1.622% - an auction record – and with an average 3.1 bid-cover ratio. Spanish and Italian 10yr yields remained close to their recent highs, and the German 10yr – previously considered a safe haven – gapped 11bp higher to 1.53%, possibly reflecting concern regarding Germany’s exposure to the Eurozone or tweaked Skandinavian pension fund rules.
The US dollar index (DXY) shed around 0.5%. EUR rose from 1.2500 to 1.2610 but reversed early NY to 1.2570. USD/JPY fell sharply around midday London from 79.75 to 79.30 ahead of the BOJ meeting which starts today. AUD ground higher in London from 0.9940 to 1.0003 and reversed with US equities to 0.9945. NZD ground up to 0.7810 before slumping in NY to 0.7750.
AUD/NZD firmed from 1.2790 to 1.2830, possibly reflection caution ahead of this morning’s RBNZ meeting.
US retail sales down 0.2% in May. Although auto sales rose 0.8%, there was broad-based weakness in many May retail components including discretionary spending like DIY, health/personal care, sports goods and restaurants. Along with downwards revisions to April, the first back to back retail falls in two years paint a softer consumer spending picture in Q2 than in Q1. Separately, business inventories rose 0.4% in Apr, the new information in the report being a 0.6% rise in retail stocks.
US producer output prices down 1.0% in May. Gasoline prices slumped 8.9%, food was down 0.6% but the core PPI rate rose an on trend 0.2%, with a rise in auto prices offset by falling light truck prices. Intermediate and crude PPI prices also fell, on both total and core definitions.
Euroland industrial production fell 0.8% in April, its 7th decline in 8 months, for a –2.3% yr annual pace of decline, its weakest since 2009. The national detail showed Germany down 2%, Spain down 0.7%, Italy down 1.9% but France up 1.5%.
AUD and NZD Outlooks: A cautious positive tone starts the local trading sessions. Locally, there is only Australian consumer confidence today – not a market mover – but the US has retail sales and PPI to watch.
NZD/USD 1 day: AUD was only a few pips shy of our 1.0010 short-term target last night. We’ll give it more leeway to do so today since daily momentum indicators remain positive. A break below 0.9930 would argue this upward correction’s over.
NZD/USD 1 day: NZD got close to our 0.7850 corrective target and appears to be tiring. A break below 0.7730 warns this upward correction’s over.
NZD/USD 1 month: Below 0.7300.
NZ 2yr swap yield: Opening today 2bp lower at 2.61%.
AUD/USD 1 month: Below 0.9500.
Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 14 June 2012. All customers please note that this information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs. Australian customers can obtain Westpac’s
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