Monday March 4, 2013 - 18:50:57 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Westpac Morning Report
Morning Report Tuesday 5 March 2013
Global market sentiment: The risk averse tone generated by China’s fresh property market curbs dissipated slightly during the London session in the absence of significant news. Eurozone PPI fell as expected, furthering speculation the ECB will adopt a dovish tone on Thursday. Fed Vice-chair Yellen said policy will remain accommodative well into the recovery. Against the above, rumours of an Italian rating downgrade swirled, and EZ officials said details of a Cyprus bailout have not yet been agreed. The Eurostoxx 50 closed up 0.1% but the S&P500 is currently down 0.4%. Commodities are slightly lower, Brent oil – 0.4%, copper unchanged, gold -0.1%, and iron ore -1.2%.
Interest rates: US 10yr treasury yields reflected a less risk averse backdrop, rising from 1.83% to 1.87%. Italian 10yr government bond yields rose 10bp amid downgrade rumours, although other peripherals were little changed. Australian 3yr bond yields bounced off 2.68% to 2.72%.
Currencies: The US dollar index (DXY) is little changed. EUR gyrated sideways between 1.2982 and 1.3020. USD/JPY fell from 93.69 to 93.17. AUD bounced off 1.0115 – an eight-month low – to 1.0169. NZD similarly bounced off 0.8193 – a two-month low – to 0.8238. AUD/NZD dipped from 1.2360 to 1.2320 but recovered in NY.
US NY ISM rose from 56.7 to 58.8 in Feb, its highest since April last year. Note that Feb 2012 was the highest since March 2011; and Feb 2011 was the highest since May 2010: as with other US data, there is a seasonal adjustment issue that boosts the NY survey data in the new year (related to the impact of the post-Lehmans collapse economic slump in late 2008-early 2009 on the seasonal factors used to adjust the raw survey data).
US Fed vice chair Yellen said the Fed should continue with its $85bn per month bond buying program while tracking possible costs and risks from the unprecedented program.
Euroland Sentix investor confidence fell from –3.9 to –10.6 in Mar, the weakest reading for the year so far. Most likely Italian political uncertainty, US spending sequester concerns and the last equity market losses were factors at play.
Euroland producer prices slowed from 2.1% yr to 1.9% yr in Jan; a higher German PPI was offset but lower French and Spanish results.
Bank of England quarterly lending update. Since the BoE introduced the Funding for Lending scheme in Aug, lenders had accessed nearly £14bn in cheap funding for lending on to households and business, but by the end of Q4 lending had fallen £1.5bn compared to end Q2. The cost of borrowing had fallen, but not the amount of lending. The BoE suggested it was too soon to expect results; just three of the 40+ banks and building societies accounted for nearly £15bn of reduced lending (Lloyds, RBS and Santander). offsetting increased lending at most other institutions.
UK PMI construction fell from 48.7 to 46.8 in Feb, its slowest since late 2009, following the weak factory PMI last week. Hometrack found house prices down 0.1% yr in Feb, their least weak outcome since late 2010.
Event risk today: There’s nothing in NZ to watch today but the Australian calendar is action packed – the RBA meeting which will be watched for the possibility of further easing, plus retail sales, current account and net exports.
NZD/USD 1 day: The NZD will follow AUD on any RBA surprise, but barring that, resistance is at 0.8250 for a push towards 0.8155.
NZD/USD 1-3 month: The positive trend since May has been broken and we now target around 0.8100 during the month ahead. Our view of a fresh high later in 2013 remains intact though.
NZ 2yr swap yield 1 day: Opening today unchanged at 2.94%.
NZ 2yr swap yield 1-3 month: Following this correction, which could yet extend to the 2.80%-2.90% area, a rise above 3.20% should ensue.
AUD/USD 1 day: Much will depend on the RBA’s tone today but barring a surprise, resistance is at 1.0180 for a push below 1.0115.
AUD/USD 1-3 month: Remains inside an 18-month consolidation triangle, which should see it reach at least 1.0100 before an eventual break above 1.0600.
Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 5 March 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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