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Forex Blog

Back to The Headlines

Sunday August 19, 2012 - 21:37:26 GMT
Westpac Institutional Bank - www.westpac.co.nz

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Forex - Westpac Morning Report

Morning Report Monday 20 August  2012

 

Market wrap
Performance was mixed among asset classes. Equities nudged higher but currencies and US interest rates fell. There was little fresh news to drive market on Fridays, equities and Eurozone peripheral bonds continuing to rally, albeit modestly, on Thursday’s voiced support by Chancellor Merkel for conditional ECB intervention and a speculation a Spanish bailout request is imminent. US data was slightly better than expected, and Fed hawks Fisher and Plosser spoke against further quantitative easing, but none of this fazed equities. Europe’s index closed 0.6% higher and the S&P500 closed up 0.2% to a fresh four year high. The CRB commodities index closed 0.4% higher. US 10yr treasury yields reversed a four day rise, closing 5bp lower than Thursday’s multi-month peak of 1.86%.

The US dollar index (DXY) closed around 0.3% firmer. EUR made an intraday peak of 1.2372 early in the London session and then fell to 1.2289 before recovering in NY to close at 1.2334. USD/JPY ground higher throughout, from 79.30 to 79.58. AUD extended its domestic session decline, from 1.0475 to 1.0411 near the NY close, in the day’s underperformance. NZD similarly extended losses from 0.8100 to 0.8062. AUD/NNZD continued lower in almost a straight line, from 1.2940 to 1.2900, and looks vulnerable to a continuation to 1.2600.

Economic wrap
US consumer sentiment rose from 72.3 to 73.6 in the preliminary Uni of Michigan report for August. This reversed the July decline, with the current index up a further 4.9pts, offsetting further slippage of 1.1pts in the outlook index. Inflation expectations rose sharply with the 5 yr view jumping 0.3 ppts to 3.0%, matching its high for the year back in March.

US leading index up 0.4% in July, reversing the June decline. Only two of the ten components (consumer expectations and orders) were lower compared to seven of the ten in June.

Canadian CPI slowed from 1.5% yr to 1.3% yr in July, and the BoC core rate dipped from 2.0% yr to 1.7% yr. Moderating apparel and energy price inflation more than offset food and communication price gains.

Euroland current account surplus widened from €10.3bn to €12.7bn in June. That is the highest surplus on record and the figures also showed a record trade surplus of €10.5bn. Exports rose 2.4% in June while imports were flat.

German producer prices decelerated from 1.6% yr to 0.9% yr in July, its slowest pace of gain since the PPI’s recent peak acceleration pace of 6.4% yr in the first half of last year. The PPI was flat in the month, following declines in May and June - the first three month run without a gain since mid 2009.

Market outlook
AUD and NZD Outlook: The local calendars are empty today, leaving markets to trade on sentiment. AUD and NZD have diverged from equities over the past week suggesting cooling sentiment towards the high-beta currencies from offshore participants.

NZD/USD 1 day: Lower today below 0.8035. Temporary bounces should be capped by 0.8100.
NZD/USD 1 month: Lower to 0.7950 or below.
NZ 2yr swap yield 1 day: Opening today 2bp lower at 2.75%.
NZ 2yr swap yield 1 month: Lower towards 2.50% as QE3 is seen as a 50/50 chance.
AUD/USD 1 day: Lower today below 1.0400, targeting 1.0350 next. Any temporary bounces should stall in the 1.0455-1.0475 area.
AUD/USD 1 month: Below 1.0400.

 

 

 

 

Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 20 August 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

financial services guide by calling +612 9284 8372, visiting www.westpac.com.au or visiting any Westpac Branch. The information may contain material provided directly by third parties, and while such material is published with permission, Westpac accepts no responsibility for the accuracy or completeness of any such material. Except where contrary to law, Westpac intends by this notice to exclude liability for the information. The information is subject to change without

notice and Westpac is under no obligation to update the information or correct any inaccuracy which may become apparent at a later date. Westpac Banking Corporation is registered in England as a branch (branch number BR000106) and is authorised and regulated by The Financial Services Authority. Westpac Europe Limited is a company registered in England (number 05660023) and is authorised and regulated by The Financial Services Authority. © 2010 Westpac Banking Corporation. Past performance is not a reliable indicator of future performance. The forecasts given in this document are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts.

 

 

 

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