Wednesday January 16, 2013 - 19:23:55 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Morning Report
Morning Report Thursday 17 January 2013
Appetite for US equities, AUD and NZD remained capped for the fourth consecutive day. Inhibiting buyers was yesterday’s World Bank downgrade of 2013 global growth (3.0% to 2.4%) as well as ongoing US debt ceiling nervousness. Those factors dominated strong Q4 earnings reports from JP Morgan and Goldman Sachs, ECB’s Nowotny who said the high EUR was not a major concern, and supportive US economic data (CPI at 1.7% yoy was lower than expected, supporting easy Fed policy). The S&P500 is down 0.1%, although the Dow Jones Transportation Index made a fresh record high (exciting Dow Theory proponents). Iron ore fell 4.9%, continuing to correct an 83% rally since
August 2012. US 10yr treasury yields dipped from 1.83% to 1.80% in London before firming in NY.
The US dollar index (DXY) is slightly firmer. EUR initially spiked from 1.3270 to 1.3325 on Nowotny’s comments but then fell into a 1.3257-1.3313 range. USD/JPY bounced from 87.79 to 88.68. AUD slipped further to 1.0532 during the London morning but recovered to 1.0565 in NY. NZD similarly dipped to 0.8368 and then recovered to 0.8417, a 2.4% rise in whole milk powder prices helping. AUD/NZD ranged between 1.2550 and 1.2590.
US industrial production rose 0.3% in December. This was a little stronger than market expectations and there were also upwards back-revisions – Hurricane Sandy’s impact in Oct is now just -0.3% (was -0.7%) thanks to utilities revisions, but the post-Sandy bounce in Nov was revised up to 1.1% from 1.0% previously. This leaves Q4 production growth at 1% - up from just 0.4% in Q3 but at the lower end of the 1%-9% range since the start of the expansion.
US CPI was flat in December, as expected, with a 1.2% fall in energy prices restraining inflation. The core measure rose 0.1% on the back of a 0.1% rise in clothing and owner-equivalent rents. In annual terms CPI was up 1.7% (down from 1.8% in Nov) and core was up 1.9%, unchanged from Nov but down from Oct’s 2.0%.
The NAHB home builders’ survey was unchanged in January at 47, a little above market expectations, and as such continues to sit at a 6-year high (though still below the 50 mark where as many home builders are optimistic as pessimistic). In the details current sales were unchanged at 51, sales expectations dropped a point to 49, but buyer traffic was up a point to 37.
The Beige book, a report summarizing the US Fed’s industry intelligence from the regions, is out later this morning.
Global Dairy prices continued their good start to 2013 with a 1.1% increase in the trade-weighted index in last night’s GlobalDairyTrade auction. The increase came on the back of a 2.0% increase that kicked off the year a fortnight ago. Whole milk powder prices led the way, increasing 2.8%, though skim milk prices pulled back a touch after recent strong gains. We expect world dairy prices to continue to trend up over the first half of the year as the effects of drought linger in the US and as Chinese demand continues to improve.
AUD and NZD Outlooks: The local economic calendar highlight today is Australia’s employment, Westpac economists estimating 10,000 jobs were lost in November (vs +5,000 consensus).
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 2.80%.
NZ 2yr swap yield 1 month: Breaking above 2.80% towards 3.00%, supported by improving NZ data.
AUD/USD 1 day: The correction since 11 Jan continues and requires a break outside the 1.0520-1.0600 sideways range to establish fresh direction.
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 17 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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