Thursday March 21, 2013 - 19:18:24 GMT
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Forex - Westpac Morning Report
Morning Report Friday 22 March 2013
Global market sentiment: The Cyprus story soured after the ECB said the country had until Monday to agree a bailout plan, otherwise it would cut emergency funding for the country’s banks. In addition, Cyprus’ central bank denied rumours the second largest bank, Poplar, is to be closed. Local media reported plans to overhaul the banking system, impose capital controls and structure a bailout are being submitted to Parliament today. A batch of US data releases failed to distract the markets. The Eurostoxx 50 closed down 0.9% while the S&P500 is currently down 0.7%. Commodities were mostly weaker, Brent oil down 1.2%, copper down 0.4% but gold up 0.5%.
Interest rates: The US 10yr treasury yield fell from 1.97% to 1.92. An auction for 10yr inflation-linked bonds went well, being awarded at a real yield of -0.60%. Eurozone peripherals curiously improved, Spain’s 10yr yield falling 14b. Australia’s 3yr bond yield responded to the global risk-averse tone by falling from 3.06% to 2.99%, while the 10yr yield fell from 3.61% to 3.55%.
Currencies: The US dollar index chopped around for little net change. EUR fell from 1.2950 to1.2880 and then consolidated above that. USD/JPY fell from 96.00 to 94.56 on doubts the BOJ will be able to engineer higher inflation. AUD performed well in the wake of China’s strong PMI data, rising from 1.0364 to 1.0459. NZD did even better, its impressive Q4 GDP print boosting it further to 0.8345 in the outperformance of the day. AUD/NZD extended its domestic session decline to 1.2505 before consolidating to 1.2545.
US existing home sales rose 0.8% in Feb, the same pace of gain as in Jan, seemingly constrained by a relative lack of supply of decent homes for sale: single family home sales fell 0.2% while condo sales posted an 8.8% rise. The median price rose 11.6% yr. The separate FHFA house price index rose 0.6% in Jan, to be up 6.4% yr.
US Philadelphia Fed factory index rose from –12.5 to + 2.0 in Mar, its first non-negative reading for the year so far. The detail showed orders stabilising at 0.5 (from –7.8), shipments accelerating from 2.4 to 3.5 and jobs up from 0.9 to 2.7. Also the US leading index rose 0.5% in Feb, its sixth straight non-negative reading. Only two of the ten components were negative, orders and consumer expectations.
US initial jobless claims rose 2k to 334k in the week ended 16/3 (the payrolls survey week). The last two weekly readings are the lowest since early 2008 apart from Jan this year when seasonal adjustment distortions were at play.
Euroland composite PMI down from 47.9 to 46.5 in advance Mar report. That is the weakest reading since Nov, and reflected weaker factory (46.6 from 47.9) and services (46.5 from 47.9) readings. In the details, France had a steady factory PMI at 43.9 but a new cycle low of 41.9 in services; still much weaker than Germany on 48.9/51.6 (down from 50.3/54.7). At face value these reading suggest some risk that German GDP fails to bounce from Q4’s slump although respondents may have marked down their surveys due to Cyprus concerns rather than observed weakness in their own activity.
UK retail sales jumped 2.1% in Feb after snow disrupted Jan sales fell 0.7%. The rise would have been amplified by the Feb seasonal factors, as “raw” retail volumes usually fall back in Feb as discount sales end. March retail sales will almost certainly show a significant fall as the snow distortion is reversed. Also the UK CBI industrial trends survey showed total orders edging lower from –14 to –15 in Mar on the back of weak domestic orders - export orders rose from –20 to –11.
Event risk today: There’s little on the local calendar today, NZ migration and Australia’s Conference Board leading index not market movers. Tonight there’s only Germany’s business confidence survey to watch. That suggest Cyprus headlines may dominate.
NZD/USD 1 day: 0.8270 should provide support today for a push above 0.8345.
NZD/USD 1-3 month: Above 0.8355 would put the NZD back into positive-trend mode, below suggests further weakness to 0.8100. Global surprises will drive it in the near term but we expect a fresh high by late 2013 on NZ’s improving economy.
NZ 2yr swap yield 1 day: Opening down 2bp higher at 2.92%.
NZ 2yr swap yield 1-3 month: Following the current consolidation, which could yet extend lower to 2.80%, a rise above 3.20% should ensue.
AUD/USD 1 day: 1.0400 should provide support today for a push above 1.0460.
AUD/USD 1-3 month: Remains inside an 18-month consolidation triangle defined by 1.0500 above and 0.9900 below. We expect the eventual break to be upwards.
Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 22 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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