Wednesday February 6, 2013 - 19:19:41 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Morning Report
Morning Report Thursday 7 February 2013
Eurozone concerns resurfaced. Fitch downgraded the outlook on the Netherlands AAA rating to negative after the government took control of the fourth largest lender. Fitch also warned Spain is pivotal to the Eurozone and risks dragging the region down. These added to mounting concerns Italy and Spain may experience leadership changes, threatening their current austerity programs. The Eurostoxx 50 fell 1.3% and Italian 10yr government bond yields rose 13bp, extending an 8-day selloff worth over 50bp. The S&P500 is currently down 0.3% and remains stalled at a multi-year high. The CRB commodities index is down0.4%, copper -0.8% but iron ore +0.6%. US 10yr treasury yields fell from 2.01% to 1.96%.
The US dollar index (DXY) benefitted from the risk averse tone, rising 0.4%. EUR slipped from 1.3596 to 1.3494 on the negative news above. Safe-haven yen outperformed,
USD/JPY falling from 94.06 to 93.29. AUD extended its domestic session decline (which was partly caused by a disappointing retail sales report), falling from 1.0360 to 1.0297 – a 3-month low - during the London morning. NZD fell from 0.8450 to 0.8391 before stabilising in the low 0.84’s. AUD/NZD dribbled slightly lower overnight to 1.2235 – a 28-month low.
No US data to report.
Canadian Ivey PMI rose from 52.8 to 58.9 in Jan, on top of Dec’s gain reversing the fall from 58.3 to 47.5 back in Nov.
German factory orders rose 0.8% in Dec, partially reversing Nov’s 1.8% fall, despite falling domestic and foreign orders in Dec. There was however a 2.4% bounce in orders from the rest of Europe.
UK house prices fell 0.2% in Jan according to the Halifax, but the annual pace rose to 1.3% yr, the first annual gain since late 2010. Separately, the BRC shop price index slowed from 1.5% yr to 0.6% yr, its slowest since 2009 and indicative of slowing inflationary pressure on the high street, especially for apparel.
AUD and NZD Outlooks: Today’s calendars are action-packed. Australia and New Zealand release employment data within a few hours of each other, providing volatility potential during the local sessions. Westpac’s economists expect minor statistical improvements in both. Tonight’s highlights are the ECB and BOE meetings, neither expected to announce policy changes.
NZD/USD 1 day: This corrective pullback since 4 Feb should end in the 0.8300-0.8400 area.
NZD/USD 1-3 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 2bp lower at 2.91%. 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 1-3 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: The decline since 11 Jan may extend to below 1.0297 today but should soon give way to a corrective bounce to the 1.0360-1.0400 area.
AUD/USD 1-3 month: Remains inside an 18-month consolidation triangle, awaiting a break higher.
AUD/NZD 1-3 month: 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 7 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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