Thursday March 14, 2013 - 19:27:07 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Westpac Morning Report
Morning Report Tuesday 15 March 2013
Global market sentiment: An optimistic tone prevailed last night. The Dow Jones Industrial index made a fresh record high while the S&P500 rose 0.3% to a fresh five-year high. There was little to pin the moves on. Some attributed it to better than expected US jobless claims, but intraday price action doesn’t fit neatly. Possibly contributing was an influential advisory report saying the Fed next week will not signal any reduction in stimulus programs. Commodities also rallied, Brent oil futures up 0.8%, copper futures up 0.4%, but non-traded iron ore set 4.4% lower. The Swiss central bank kept policy unchanged as expected, while Norway’s statement was a slightly dovish surprise.
Interest rates: US 10yr treasury yields initially rose from 2.03% to 2.07% but slipped during the NY session to 2.02%. A 30yr auction disappointed expectations, awarded at 1bp above market yield with a soft bid-cover ratio of 2.4 (vs 2.6 average). Australian 3yr bond yields consolidated the domestic session’s surge, slipping from the 11-month high of 3.20% to 3.12%. The 10yr similarly corrected from 3.74% to 3.65%.
Currencies: The technically stretched US dollar index fell by around 0.9% in NY. EUR initially dipped from 1.2977 to 1.2912 but rebounded in NY to 1.3032. GBP outperformed, jumping from 1.4925 to 1.5119. USD/JPY fell from 96.60 to 95.69. AUD maintained earlier employment data-inspired gains, pushing even further t0 1.0401 – a six-week high. NZD partly recovered from its RBNZ dovish surprise, bouncing from 0.8167 to 0.8235. AUD/NZD consolidated the earlier event-fueled surge, ranging between 1.2630 and 1.2685.
US initial jobless claims fell 10K to 332K in the week ended 10/3, beating market expectations and now only a touch above January’s 330k cycle low. So far claims have averaged 334k in March, down from the roughly 350k average in Jan-Feb.
The US producer price index jumped 0.7% in line with expectations (1.7%yr) – mostly boosted by rising energy prices which rose 3% led by a 9.3% rise in gas prices. The core index rose a more sedate 0.2% (1.7%yr), also as expected.
Central bank non-action in Norway and Switzerland. As expected, both central banks left policy rates unchanged and the SNB kept the 1.20 currency peg against the Euro. Both are facing the dilemma of surging housing markets and household borrowing coupled with a high exchange rate and thus low inflation. The SNB has put in place a counter-cyclical capital buffer to cushion the banking system against the imbalances that have build up, but expressed doubt that this measure would have a serious impact on mortgage rates. We foresee similar dilemmas for the RBNZ but maintain that the RBNZ will eventually have to raise interest rates given the twin forces of the Canterbury rebuild and a reviving housing market.
Event risk today: Locally, NZ has PMI and monthly consumer confidence, and RBNZ Assistant Governor McDermott speaks on forecasting and monetary policy (published on website). Tonight there’s US CPI, industrial production and consumer sentiment.
NZD/USD 1 day: The immediate outlook is unclear, although above 0.8235 would target 0.8285.
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 2bp lower at 2.89%.
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 1.0335 for a push above 1.0400.
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 15 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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