Thursday February 14, 2013 - 21:11:02 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Westpac Morning Report
Morning Report Friday 15 February 2013
Disappointing GDP reports from Europe lent a risk-off tone to markets during the London morning. Eurozone GDP fell 0.6% in Q4 against -0.4% expected by the market. It was the worst result since 2009 and caused a 1.5% fall in the Eurostoxx 50 (later rebounded to close -0.8%). The S&P500 is currently unchanged, lower jobless claims helping sentiment during the NY session. US 10yr treasury yields fell from 2.06% to 2.01%. The 30yr auction went well at 0.5bp below market yield.
The US dollar index (DXY) is around 0.5% higher. EUR fell from 1.3440 to 1.3315 during the London morning and then drifted sideways. ECB member Constancio added to the negative vibe with comment that negative interest rates are possible. USD/JPY fell from 93.71 to 92.94. AUD ranged between 1.0327 and 1.0366. Boosted earlier by strong economic data during the domestic session, NZD made a fresh 17-month high at 0.8514 just before the Euro-data but the corrected to 0.8459. AUD/NZD dipped from 1.2220 to 1.2170 but recovered in NY.
US initial jobless claims fell 27k to 341k in the week ended Feb 9. Unlike in Jan, the Labor Dept did not fess up to seasonal adjustment issues driving the drop, so it would seem to indicate a genuine reduction in layoffs.
Eurozone GDP contracted –0.6% in Q4, in line with Westpac’s low end forecast, and below the –0.4% consensus forecast. National GDP reports were also released today for many member states: Germany (–0.6%), France (–0.3%) undershot consensus by 0.1 ppts, Italy (–0.9%) was 0.3 ppts weaker and Portugal (–1.8%) 0.8 ppts below expectation. As for the eurozone aggregate, Q4 was the weakest yet of the current recession in these countries, though Germany and France don’t currently meet the 2 consecutive quarters technical definition of recession. The Netherlands beat consensus by a tick, contacting at a –0.2% pace in Q4. Greece contracted at a –6.0% annual pace in Q4 (quarterly data not available). The eurozone recession is now five quarters long, matching the 2008-09 slump in length though not depth. On any reasonable view of the growth outlook (such as the ECB’s “recovery starts later this year”), this weak Q4 outcome, by setting a low starting point for the current year, locks in a full year 2013 contraction in GDP, on top of 2012’s –0.5% fall.
AUD and NZD Outlooks: NZ has Q4 retail sales today, Westpac economists expecting a 2.0% bounce (vs consensus 1.4%) which, iff proven correct, should boost the NZD further. Australia’s calendar is bare today. The G20 meeting concludes tomorrow but indications are for a watered-down comment on exchange rates, falling well short of warning against a currency war.
NZD/USD 1 day: The 2 cent rally this week needs to correct, ideally to the 0.8390-0.8440 area, before it can advance to the 0.8570 major target. Retail sales this morning should provide a boost.
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 down 1bp at 2.99%.
NZ 2yr swap yield 1 month: Our next major target level is 3.18%, supported by improving NZ data and higher US yields.
AUD/USD 1 day: The 1.0327 level below looks vulnerable today, any break then targeting 1.0280.
AUD/USD 1-3 month: Remains inside an 18-month consolidation triangle, which could see it reach 1.0150 before an eventual break above 1.0600.
Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 15 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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