Monday February 4, 2013 - 19:01:21 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Morning Report
Morning Report Tuesday 5 February 2013
European politics caused a few market jitters. In Italy, former PM Berlusconi’s coalition rose in popularity to within 5 percentage points of the front-runner, creating fears the incumbent’s austerity pledges will be undermined. In Spain, current PM Rajoy faced corruption allegations, raising the possibility of fresh elections. Stockmarket indices in Italy and Spain lost 4.5% and 3.8%, respectively, while their 10yr bond yields rose 14bp and 23bp (one-month highs). Contagion saw the S&P500 slump 1.0%, reversing the previous day’s gain, and the CRB commodities index lose 0.6%. US treasuries benefitted from the risk aversion, yields falling sharply from 2.06% to 1.96%.
The US dollar index (DXY) also benefitted from the risk averse tone, bouncing 0.5% following a seven-day slide. EUR fell from 1.3635 to 1.3523. USD/JPY slipped to 92.49 after making a fresh 2 ½-year high of 93.18 during the London morning. AUD was relatively steady, contained within 1.0412-1.0441, as was NZD between 0.8436 and 0.8471. AUD/NZD consolidated its recent plunge, tracking sideways inside 1.2310-1.2345.
US factory orders rose 1.8% in Dec, with durables revised down from 4.6% to 4.3% and non-durables down 0.3%. Factory stocks rose just 0.1% after nil growth earlier in the fourth quarter.
US NY ISM slipped from 57.7 to 56.7 in Jan; both months still represent the strongest pair of readings since March-April last year. As with other US surveys and activity data, this series tends to perform strongly around the turn of the year before weakening mid year. This is due to the huge (distortionary) impact the Lehmans collapse and its aftermath had on the seasonal factors which are used to adjust the raw data.
Euroland Sentix investor confidence rose from –7.0 to –3.9 in Feb, its sixth straight gain since September last year, reflecting increased confidence that the ECB’s OMT bond-buying program, and more recently further Fed easing and fiscal agreement, have reduced the “tail risks” that were threatening European and global growth prospects. In other data the Euroland PPI was steady at 2.1% yr in Dec.
UK PMI construction steady at 48.7 in Jan, its sixth sub-50 reading in the past eight months.
AUD and NZD Outlooks: The highlight of the local calendars is the RBA meeting this afternoon. Our economists (and the markets) do not expect a rate cut but any pointers to one in March would hurt the AUD (rates markets have priced in a 50% chance). NZ has wage costs and a secondary employment indicator – usually not market movers. The GlobalDairyTrade auction tonight will be watched closely.
NZD/USD 1 day: We favour a corrective pullback to 0.8400 today.
NZD/USD 1 month: The positive trend since May remains intact as long as 0.8215 holds, targeting 0.8493 and beyond (0.8570 next, 0.8840+ sometime this year).
NZ 2yr swap yield 1 day: Opening today 3bp lower at 2.93%. A slightly deeper correction to the 2.80%-2.90% during the next few days would not surprise given the speed of January’s 30bp rise.
NZ 2yr swap yield 1 month: With the 2.94% medium term target attained, our next major target level is 3.18%, supported by improving NZ data and higher US yields.
AUD/USD 1 day: 1.0360 below remains vulnerable, the 1.0450-1.0475 area capping again today.
AUD/USD 1 month: Remains inside an 18-month consolidation triangle, awaiting a break higher.
AUD/NZD 1month: The break below 1.2400 points to 1.2100. The technical picture is consistent with relative data flow and central bank biases.
Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 5 February 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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