Tuesday January 8, 2013 - 20:05:46 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Morning Report
Morning Report Wednesday 9 January 2013
Sentiment remained cautious approaching the US company earnings reporting season. Economic data overnight from both the Eurozone and the US was mixed and had little market impact. The S&P500 is currently down 0.6% on the heels of moderate falls in Asia. Commodities fared better, Brent oil up 0.4%, copper -0.1%, gold +0.9% and Tianjin iron ore +3.0% (a 3-month high). US 10yr treasury yields are 3bp lower at 1.87%. A 3yr auction went well with a solid 3.6 bid-cover ratio. Eurozone peripherals were relatively stable, possibly helped by news that Japan would invest some of its fx reserves in the ESM rescue fund.
The US dollar index (DXY) rose slightly. EUR fell from a Sydney session high of 1.3140 to 1.3057. The yen outperformed, technically overbought USD/JPY falling from Sydney’s 87.81 to 86.98. Reuters reported the BOJ will consider doubling its inflation target to 2.0% at its meeting on 21 Jan. AUD remained inside its previous daily range, trading between 1.0470 and 1.0512. NZD slipped from 0.8379 to 0.8335, helping AUD/NZD firm slightly from 1.2520 to 1.2570.
Euro zone unemployment rose to 11.8% in Nov from 11.7% the previous month, a new record high but line with expectations. The breakdown continues to show big regional divergences, with Spanish unemployment jumping to 26.6% and French unemployment also rising to 10.5% but German unemployment remaining steady at just 5.4%.
Euro zone retail sales rose just 0.1%mth in November (0.3% expected) but October’s fall was revised up to -0.7%, and this was the first increase since July. In another sign that the rate of economic decline may be slowing, Eurozone ESI economic confidence rose to 87.0 from 85.0, more than expected and again the highest since July.
US NFIB small business optimism rose more than expected, to 88.0 in Dec from November’s very weak 87.5%. However hiring plans slid and economic expectations remained very pessimistic ahead of the fiscal cliff. Meanwhile, post-cliff, IBD-TIPP economic optimism lifted a little in Jan to 46.5 from Dec’s very weak 45.1, but this is still the weakest since October.
NZD and AUD outlook: Australian retail sales today will be watched by markets, Westpac’s estimate of a 0.4% monthly gain slightly above 0.3% consensus. NZ has building permits which only stirs markets if the surprise is large. The US reporting season kicks off shortly with Alcoa after the NY close.
NZD/USD 1 day: Still appears to be in corrective mode favouring lower today to 0.8290-0.8325 area.
NZD/USD 1 month: The positive trend since May remains intact, targeting 0.8470 and beyond. Below 0.8150 breaks the trend.
NZ 2yr swap yield 1 day: Opening today 1bp lower at 2.76%.
NZ 2yr swap yield 1 month: Breaking above 2.80% towards 3.00%, supported by improving NZ data.
AUD/USD 1 day: Still appears to be in corrective mode favouring lower today to 1.0450-1.0470 area.
AUD/USD 1 month: Remains inside a 17-month triangle, and needs to break above 1.0600 to confirm an upward breakout
Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 9 January 2013. 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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