Tuesday January 15, 2013 - 19:50:26 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Westpac Morning Report
Morning Report Wednesday 16 January 2013
Risk appetite remained constrained. Concerns over the US debt ceiling, warnings from Fitch on the risk of downgrades to the US and UK’s AAA ratings, a disappointing German GDP outturn for 2012 (0.7%), and mixed US data (NY region manufacturing and PPI disappointed while retail sales comforted) all weighed. Possibly supportive was Fedspeak from non-voting doves Rosengren and Kocherlakota who implied QE4 would remain intact in 2013, the latter arguing for even more accommodation. The S&P500 is currently down 0.1% after rebounding 0.5% early NY. Commodities were mixed, Brent oil down 0.7%, copper+0.1%, gold +1.0%, and iron ore -1.1%. US 10yr treasury yields extended an 8-day slide by 3bp to 1.81%.
The US dollar index (DXY) is little changed. EUR fell from 1.3388 to 1.3310. USD/JPY extended yesterday’s decline from 89.00 to 88.29, the catalyst being official comments reportedly concerned about excessive yen weakness. AUD fell in London from 1.0570 to 1.0526 but recovered in NY to 1.0566, largely mimicking US equities. NZD’s London slump, from 0.8840 to 0.8373, was curiously sharp given the positive economic data releases earlier in the day. That helped AUD/NZD rise from 1.2515 to 1.2595.
US retail sales beat expectations, rising 0.5% in Nov (consensus 0.2%). The core ex auto/gas/building component (a better guide to the personal consumption data) rose 0.6%, vs 0.3% expected. While solid income growth in Dec likely boosted sales, US household spending faces headwinds in the new year both the end to payroll taxes in Jan.
However the New York Fed manufacturing survey disappointed, falling to 7.8 in Jan from an upwards-revised 7.3% in December. A bounce had been expected as the impact of Superstorm Sandy and the fiscal cliff dissipated. New orders fell to -7.2 (from -3.4), while shipments fell to -3.1 (from 11.9). The labour questions were a little better (though still weak), with employment improving to -4.3 from -9.7, and the workweek rising to -5.4 from -10.8.
The US producer price index was also slightly weaker than expected, extending declines in Oct and Nov with another 0.2% fall. Falls in food (-0.9%) and energy (-0.3%) prices led the decline. The core PPI was also slightly below expectations, rising 0.1%. In annual terms producer price inflation slowed to 1.3% from 1.5% in November, and core fell to 2% from 2.2%.
US business inventories rose 0.3% in November, a little faster than expected, but the trend remains for inventories to be kept tight.
German GDP was reported to have grown just 0.7% in 2012 after 3% in 2011, implying a contraction in in the December quarter – roughly -0.5% (more precise quarterly numbers will be published next month). Reflecting the hit to sentiment from the euro zone debt crisis there was a particular slowdown in plant and machinery investment, which fell 4.1% over the year. e
NZD and AUD outlook: The local economic calendars are empty today. The Eurozone and US have CPI overnight, and there is the fortnightly GlobalDairyTrade auction.
NZD/USD 1 day: This minor correction persists and should find support between 0.8335 and 0.8360.
NZD/USD 1 month: The positive trend since May remains intact, targeting 0.8470 and beyond.
NZ 2yr swap yield 1 day: Opening today 1bp lower at 2.81%.
NZ 2yr swap yield 1 month: Breaking above 2.80% towards 3.00%, supported by improving NZ data.
AUD/USD 1 day: AUD’s minor correction since 11 Jan is possibly complete at 1.0526 but needs a push above 1.0578 today to support the argument.
AUD/USD 1 month: Remains inside an 18-month consolidation triangle, awaiting a break higher.
Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 16 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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