Tuesday February 19, 2013 - 19:17:50 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Morning Report
Morning Report Wednesday 20 February 2013
Market sentiment was supported by a jump in German investor confidence. The reading, at the highest level since April 2010, was seen as further evidence of Eurozone stability and helped push the Eurostoxx 50 1.7% higher. The S&P500 is currently up 0.5% to a fresh 2-year high and within 2% of an all-time high. Commodities didn’t follow suit, though, a disappointing US homebuilding sentiment survey plus an earlier report China seeks to cool its property market causing some damage to copper (-2.3%). US 10yr treasury yields traded in a narrow 1.99%-2.01%, little changed from last Friday.
The US dollar index (DXY) is slightly weaker. EUR fluctuated even after the supportive German data but bounced meaningfully after midday London from 1.3329 to 1.3396. An SNB reaffirmation of its EUR/CHF floor at 1.20 gave EUR a late session boost. USD/JPY fell from 93.68 to 93.32. AUD extended its domestic session rally from 1.0320 to 1.0365. NZD recovered following a story China rejected some milk powder due to incorrect labelling, rising from 0.8430 to 0.8487. The fortnightly dairy auction saw whole milk powder prices rise 5.5%, adding to NZ’s positive fundamental story. AUD/NZD fell from 1.2250 to 1.2200.
US NAHB housing market index slipped from 47 to 46 in Feb, its fall since the temporary dip in April last year, but still close to a six year high. The detail showed prospective buyer traffic dip from 36 to 32 (lowest since Sep), present sales of single family homes eased from 52 to 51 but future sales rose from 49 to 50 after slipping in both Dec and Jan.
US CPI revisions were minor; the recent core CPI monthly profile was unchanged at 0.2%, 0.1%, 0.1% through Q2.
Canadian wholesale sales fell 0.9% in Dec due to sharply lower communications equipment shipments.
Eurozone construction output fell 1.7% in Dec, its thirs fall in three months, for an annual pace of decline of –4.8% yr.
German ZEW analysts’ outlook survey rose from 31.5 to 48.2 in Feb, its highest in almost three years, a further indication that the consensus view is that Germany/Europe is now successfully grappling with the sovereign debt issue, reducing the prospect of catastrophic downside risks crystallising. This series has made four distinct peaks since the 2008-09 recession: all were short-lived with subsequent collapses in ZEW outlook driven by the Greek budget meltdown and contagion to Portugal/Ireland in 2010; the approaching recession in 2011; and the Spanish/Italian contagion and deepening recession of 2012. Fourth time lucky? We’ll see. Note that the ZEW current index slipped to a new cycle low of 5.2 from 7.1 in Jan, consistent with the slump in GDP growth at the end of 2012, reported just last week.
AUD and NZD Outlooks: NZ’s Q4 PPI released today is stale news given CPI is known, but markets have been alerted to a speech on the exchange rate by RBNZ Governor Wheeler (closed to media) to manufacturers and exporters in Auckland at 3:30pm (local time). Australia’s wage cost report will be watched by markets, Westpac expecting a slight above consensus result. Tonight there are minutes from the recent Fed and BOE policy meetings.
NZD/USD 1 day: Major support is at 0.8390 for a push above 0.8534 during the week ahead.
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 3.05%.
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 positive impetus could push it to 1.0400 today but price action looks corrective and 1.0227 remains vulnerable during the week ahead.
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 20 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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