Wednesday January 9, 2013 - 19:07:22 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Morning Report
Morning Report Thursday 10 January 2013
The US company reporting season lent a mildly risk-supportive tone to markets. Bellweather Alcoa was first to report and beat estimates for sales, against analyst expectations Q4 would see the slowest profit growth for S&P500 companies since 2009. The S&P500 is currently up 0.2%, but more notably the VIX barometer of risk aversion slipped to a five year low. Commodities were subdued, Brent oil down 0.4%, copper -0.1% and gold -0.4%. US 10yr treasury yields fell from 1.88% to 1.85%, although a 10yr auction went poorly (1bp above market yield and sub-average bid-cover). In the Eurozone, Greek 10yr bond yields bounced 29bp.
The US dollar index (DXY) is slightly firmer. EUR fell from 1.3096 to 1.3037 in London, partly due to a disappointing German industrial production report, with expectations of a dovish tone at tonight’s ECB meeting also contributing. USD/JPY rose from 87.40 to 88.02, further Japanese policy rhetoric seen during the London session. AUD was volatile, initially slipping to 1.0492 with the EUR but then bouncing with US equities to 1.0535 before slipping again to 11.0500. NZD initially slipped to 0.8350 but recovered to 0.8410. AUD/NZD spiked briefly from 1.2520 to 1.2570.
No US data to report.
Canadian housing starts down 1.7% in Dec, their fourth monthly decline. However single family starts rose 8.6%; the fall was due to a further decline in multiples, which have slipped 21% from their August peak.
German industrial production rose 0.2% in Nov, the first rise in four months, but the annual pace of decline was little changed at –2.9% yr.
UK trade balance £9.2bn in Nov, down from £9.5bn in Oct. Exports rose 2.9% more than offsetting a 1.1% imports rise. Separately, the BRC reported shop price inflation steady at 1.5% yr in Dec.
NZD and AUD outlook: NZ’s trade balance – an occasional market mover - is reported this morning, Westpac expecting a larger deficit than consensus. Australia has building permits, but more important will be China’s trade balance this afternoon. Tonight’s ECB and BOE meetings should result in no change, although the ECB may hint at future rate cuts.
NZD/USD 1 day: Expect 0.8350 to hold for a push above 0.8410.
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 2.74%.
NZ 2yr swap yield 1 month: Breaking above 2.80% towards 3.00%, supported by improving NZ data.
AUD/USD 1 day: Price action since 7 Jan has been consolidative, support today at 1.0490 for a push slightly higher to 1.0540.
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 10 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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