Wednesday January 30, 2013 - 19:03:06 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Westpac Morning Report
Morning Report Thursday31 January 2013
AUD and NZD underperformance was a notable feature of trading last night. Global sentiment remained elevated initially, buoyed by a positive surprise from US private sector employment, but slipped following a disappointing US GDP result (although rosier details muted the impact). The S&P500 initially made a fresh five-year high but then slipped to be -0.1% currently. Commodities are generally stronger, Brent oil +0.3%, copper +1.6%, gold +0.9% and iron ore +0.7%. US 10yr treasury yields rose from 2.00% to a fresh nine-month high of 2.03% during the London morning. A 7yr auction saw tepid demand ahead of the FOMC. Italian 10yr yields rose 15bp despite a decent 2yr auction, possibly looking ahead to next month’s election.
The US dollar index (DXY) fell by around 0.5% throughout the evening. The day’s outperformer was CHF, followed by EUR which punched through the 1.3500 barrier to 1.3578 – a 14-month high. USD/JPY also pushed higher initially, from 91.00 to 91.41 – a 30-month high – but then retreated. AUD fell from 1.0475 to 1.0403 before settling in NY. NZD underperformed ahead of today’s RBNZ meeting, extending the domestic session declines from 0.8370 to 0.8294. AUD/NZD rose from 1.2510 to 1.2550.
US Q4 GDP contracted 0.1% annualised, its first decline since Q2 2009. A sharper than expected reversal of Q3’s defence spending jump saw government spending subtract 1.3ppts from GDP, on top of a 1.3 ppt drag from inventories and 0.3 ppts from net exports. But the private sector spending components were actually stronger in Q4, with personal consumption accelerating from 1.6% to 2.2% annualised, business investment from –1.8% to 12.4% and housing from 13.5% to 15.3%: together these sectors added 2.8 ppts to the growth bottom line. The core PCE deflator slowed from 1.1% to 0.9%, indicative of subdued inflation and back at the pace that triggered deflation concerns in H2 2010.
US ADP private payrolls rise 192k in Jan, their fastest rise since the Dec-Feb 200k+ outcomes a year ago (the tendency in 2009-2012 has been for US activity data to surge around the turn of the year then weaken again a few months down the track).
Euroland economic confidence rose from 87.8 to 89.2 in Jan, and the business climate index improved slightly from –1.11 to –1.09. But the national detail in the industry surveys again showed France lagging Germany, including in retail sales according to two separate Jan surveys.
UK net consumer credit grew £0.6bn in Dec and mortgage outstandings were up £1.0bn, easily the fastest month for household loan growth in H2 2012 when adjusted for the Q3 Olympics distortion.
AUD and NZD Outlooks: The FOMC announcement an hour from now will be followed closely, our expectation being a confirmation of commitment to stimulus. Then 30 minutes later we have the RBNZ’s OCR Review, where the OCR will remain on hold at 2.5%, with a slight dovish tone to the press release (reflecting low inflation and high NZD) a possibility. Australia’s Q4 terms of trade is reported today.
Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at31 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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