Tuesday January 29, 2013 - 19:00:24 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Morning Report
Morning Report Wednesday 30 January 2013
Risk sentiment remained elevated last night. The S&P500 made a fresh five-year high and is currently up 0.4%, 75% of US company earnings for Q4 beating consensus so far (175 companies in the S&P500 have reported). There was a consumer confidence report which disappointed, possibly due to income tax hikes, but market impact was minor. Among major commodities, Brent oil is up 0.5%, copper +0.6% and gold +0.4%. US 10yr treasury yields initially dipped from 1.98% to 1.95% following the consumer confidence report but have fully recovered. A 5yr auction went well given the slight risk-seeking atmosphere, the bid-cover ratio of 2.9 vs 2.7 previously. Eurozone peripheral yields are generally lower.
The US dollar index (DXY) is around 0.3% lower. EUR rose from 1.3414 to 1.3496 – a one-year high - during the London afternoon and then consolidated amid 1.35 barrier option protection. USD/JPY fell from 91.02 to 90.33 before consolidating, US blockage of Softbank’s $20bn takeover of US company Sprint cited. AUD extended its domestic session rally from 1.0440 to 1.0471. NZD also extended from 0.8355 to 0.8380. AUD/NZD firmed slightly from 1.2480 to 1.2510.
US S&P CaseShiller home prices rose 0.63% during November versus a rise of 0.61% the previous month. The annual rate increased to 5.5% from 4.2% and despite being just shy of market consensus, the year-on-year gain was the highest since August 2006. Low inventories, record low mortgage rates and a relatively steady labour market look set to continue to support the US housing market over the coming months.
US consumer confidence fell, however, to 58.6 in January from an upwardly revised 66.7. The fall takes the index to the lowest level for 14 months and the magnitude of the decline appears somewhat at odds with the recent economic data and generally improved sentiment. Most of the weakness appears down to the increase in the payroll tax which is likely to dampen consumption over Q1. Current conditions fall to 38.8 from 46.4 while expectations were down to 76.7 from 88.4.
German GfK consumer confidence rose to 5.8 in February from 5.7. Although only a small rise, the improvement is in line with other survey data released over the past week or so (IFO, PMIs and ZEW) which all point to growth rebounding in Q1 following the contraction in Q4. The expectations gauge for January rose to -11.3 from -17.9 with income expectations and willingness to buy both also up sharply.
French consumer confidence remained steady at 86 in January after some modest improvements in the labour market. The index is currently towards the middle of the range that has been in place over the past two years.
AUD and NZD Outlooks: There’s little to watch locally today, NZ building permits minor for markets. More important will be US data tonight (private sector payrolls, Q4 GDP) plus the Fed meeting’s conclusion which will probably reaffirm its commitment to stimulatory policy.
NZD/USD 1 day: Supported at 0.8350 for a push higher to 0.8400 today.
NZD/USD 1 month: The positive trend since May remains intact as long as 0.8215 holds, targeting 0.8475 and beyond.
NZ 2yr swap yield 1 day: Opening today 1bp lower at 2.89%.
NZ 2yr swap yield 1 month: The break above 2.80% heralds 2.94%, supported by improving NZ data and higher offshore yields.
AUD/USD 1 day: Held trend support (since late October) at 1.0385 but needs to break above 1.0485 to convince this rally is sustainable.
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 30 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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