Sunday February 17, 2013 - 21:33:51 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Westpac Morning Report
Morning Report Monday 18 February 2013
The week ended on a slight risk-averse note, AUD, NZD and precious metals performing particularly poorly. Contributing to the weakness was a Wal-Mart report of the worst start to a month in seven years. That took the zing out of US equities, the S&P500 closing down 0.1%. Prior to that US data was generally supportive, consumer confidence and NY manufacturing beating consensus but industrial production disappointing. The CRB commodities index fell 0.4% to a 1-month low. US 10yr treasury yields bounced of 1.98% to 2.04% on the US data but slipped to 2.00% with equities.
The US dollar index (DXY) is slightly firmer. EUR initially fell from 1.3393 to 1.3307 but recovered to 1.3376, Draghi (signs of stabilisation, no EUR target) and Weidman’s (no rate cut just to weaken EUR) comments supportive. The yen underperformed following the G20 communique which refrained from criticising Japan, USD/JPY rising from 92.23 to 93.81. AUD weakened from the London morning onwards, 11.0370 to 1.0288. NZD similarly fell from 0.8519 to 0.8434. AUD/NZD stabilised after earlier making a 2-year low at 1.2141, rising to 1.2213. Weekly CFTC future positioning data showed EUR, AUD and NZD longs were reduced, while yen shorts were pared.
US industrial production fell 0.1% in January, softer than expected. Vehicle assemblies fell back from a new cycle high in the previous month, partly offset by a 3.5% bounce in utility output as colder weather set in. A sizeable upward revision to the post-Hurricane Sandy rebound in Nov-Dec suggests that the surprise 0.1% drop in the preliminary reading of Q4 GDP will be revised away in later estimates. Separately, the Empire State manufacturing index rose to +10 in February after two months in negative territory.
The University of Michigan consumer sentiment index rose from 73.8 to 76.3 in February, with gains in both current conditions (from 85.0 to 88.0) and expectations (from 66.6 to 68.7). Sentiment fell sharply in late 2012 as the ‘fiscal cliff’ approached, and while some major aspects of this are still to be resolved, confidence has gradually lifted so far this year. Both short-term and long-term inflation expectations also edged higher.
The euro zone recorded a trade surplus of €11.7bn in December. The balance has been in surplus since late 2011, though the ‘improvement’ is largely a product of imports falling faster than exports: imports -3% vs exports -1.8% for the latest month.
UK retail sales volumes fell 0.6% in January, much weaker than expected, and with December revised from -0.1% to -0.3%. Heavy snowfall was cited as a factor in the latest month’s weakness, although the effect seems to have been rather selective - food sales saw the biggest decline (-1.6%), but only for small retailers.
AUD and NZD Outlooks: It could be a slow start to the week given the US holiday. NZ has services PMI while Australia has vehicle sale – not market movers.
NZD/USD 1 day: A bearish outside-down day points to downside towards 0.8380 today.
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 unchanged at 3.03%.
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: We expect a fall towards 1.0227 today, signalled by Friday’s bearish outside-down day.
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 18 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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