Sunday February 10, 2013 - 23:37:40 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Morning Report
Morning Report Monday 11 February 2013
The week ended on a risk seeking note, improved trade data from China and the US notable contributors. The US result means Q4 GDP may be revised from a small negative to a small positive. The S&P500 closed up 0.5% at a fresh five-year high. Commodities also benefitted, Brent oil up 1.4%, copper +0.9%, although gold slipped 0.3%. US 10yr treasury yields responded to the US data by rising from 1.93% to 1.99% but fell into the close as news broke of a disruptive snow storm in the northeast.
The US dollar index (DXY) was volatile but is little changed on the day. EUR extended a 4-day slide from 1.3578 to 1.3353 on little fresh news but continuing concerns regarding Italian politics, the Spanish PM’s scandal, and ECB currency rhetoric. USD/JPY initially fell from 93.50 to 92.17 but stabilised to 92.90. AUD initially rose from 1.0282 to 1.0348, helped by the Chinese data, but then diverged from US equities to slip to 1.0306. NZD similarly rose from 0.8340 to 0.8389 before retreating to 0.8338. AUD/NZD firmed slightly from 1.2310 to 1.2360. Futures market positioning in AUD fell slightly (from very long) whereas in NZD it rose slightly. EUR longs increased while yen shorts were little changed.
US exports up 2.1% and imports down 2.7% saw the trade deficit narrow by $10bn to $38.5bn in Dec; about a quarter of the deficit reduction was due to oil price/volume shifts. Exports were constrained by declines in consumer/capital goods and autos, but imports were down almost across the board. The net exports drag on Q4 GDP growth is likely to be revised to less than the advance –0.25 ppts estimate. Also wholesale inventories fell 0.1% in Dec, their first decline since June and only the third monthly fall since 2009.
Canadian trade deficit narrowed from C$1.7bn to C$0.9bn in Dec as exports fell 0.9% (mainly due to energy and autos) and imports dropped 2.8% (everything but energy lower).
Canadian employment fell 22k in Jan, the first fall in six months, after a cumulative jobs gain of more than 180k over the last five months of 2012. Consistent with the underlying strength in hiring, the jobless rate fell to a new post recession low of 7% in Jan.
Canadian housing starts fell 18.5% in Jan, their fifth decline in a row, led by multiples off 29% but single family starts were down 11%. Total starts annual pace of decline was –19.7% in Jan. Recall that building permits tumbled from record levels in late 2012, pre-empting today’s numbers.
EU leaders’ summit delivers spending cuts in 2014-2020 budget, the first in over half a century.
German exports rose 0.3% in Dec, the first rise since August. Imports fell for a second month, by 1.3% in Dec.
AUD and NZD Outlooks: Housing data from NZ and housing finance data from Australia today are unlikely to be significant market movers, and the global calendars are quiet. China and much of Asia are on holiday today.
NZD/USD 1 day: Needs to break above 0.8390 to convince the uptrend remains intact, below 0.8300 would do otherwise.
NZD/USD 1-3 month: The positive trend since May remains intact as long as 0.8250 holds, targeting 0.8493 and beyond (0.8570 next, 0.8840+ sometime this year).
NZ 2yr swap yield 1 day: Opening today unchanged at 2.89%.
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: Friday saw an upward correction to around 1.0350 and that level should provide a cap today, 1.0255 below vulnerable.
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 11 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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