Wednesday March 13, 2013 - 19:25:59 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Morning Report
Morning Report Thursday 14 March 2013
Global market sentiment: A downbeat mood prevailed until the NY session when a strong US retail sales report was released. Prior to that, there was a disappointing Eurozone industrial production report, a weak Italian bond auction, and a potential Italian coalition member opining that Italy was already de facto outside the Eurozone. The S&P500 is currently up 0.2%, having bounced 0.5% from its intraday low. Commodities struggled, though, weighed down by China’s efforts to cool the housing market (Shanghai Composite equities index closed down 1.0%). Brent oil is down 1.1%, copper -0.8%, and iron ore -3.1%.
Interest rates: US 10yr treasury yields initially slipped from 2.02% to 2.00% before bouncing on retail sales to 2.06% settling back at 2.02% following the 10yr auction. The auction went well, awarded at 2.03% (vs 2.06% market) with a bid-cover ratio of 3.2 (vs 3.0 average). Italian and Spanish 10yr bond yields rose 6bp and 4bp respectively. Australian 3yr bond yields were confined to a 2.98%-3.01% range, while the 10yr traded between 3.56% and 3.61%.
Currencies: The US dollar is around 0.4% higher, notably rising against the EUR and JPY. EUR fell from 1.3065 to 1.2924 before partly recovering in NY to 1.2965. USD/JPY bounced from 95.45 to 96.26, rumours of an emergency BOJ meeting persisting. AUD ground lower from 1.0334 to 1.0282, currently back at 1.0310. NZD fell from 0.8277 to 0.8219 and rebounded to 0.8266. AUD/NZD fell from its intraday high of 1.2535 to 1.2475.
US retail sales rose more strongly than expected in February, up 1.1% (market 0.2%). To some extent this reflected rising gas outlays (US import prices were 1.1% higher in Feb, vs 0.5% expected) but the core ex autos & gas figure also beat expectations, rising 0.4%. January’s estimates were also revised higher. We believe strained public and private balance sheets will reemerge as a constraint on US growth as the year wears on, but for now the recent run of firmer US data continues.
Euro zone industrial production posted a weak start to the year, falling 0.4% in Jan (market -0.1%) – though upwards revisions to earlier months meant that the annual decline (-1.3%) was not as steep as the -2% expected. Production declines in Germany (-0.4%) and France (-1.2%) contributed to the weak number.
Event risk today: The local calendars are very important today. The RBNZ’s Monetary Policy Statement will be keenly watched for any hawkish skew arising from the housing market/NZD/drought mix. Australia then has its employment report, Westpac’s economists forecasting +17,000 jobs (vs +10,000 consensus). There’s also inflation expectations and Assistant RBA Governor Kent’s speech.
NZD/USD 1 day: A narrow recent range of 0.8220-0.8280 is waiting to be broken by the RBNZ outcome this morning. We think higher.
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 1bp higher at 2.97%.
NZ 2yr swap yield 1-3 month: Following the current consolidation, which could yet extend lower to the 2.80%-2.90% area, a rise above 3.20% should ensue.
AUD/USD 1 day: Supported at 1.0267 for a push above 1.0335 towards 1.0390.
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 14 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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