Sunday March 24, 2013 - 19:19:01 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Morning Report
Morning Report Monday 25 March 2013
Global market sentiment: Risky markets were lifted on Friday after the Cyprus saga took a positive turn, its parliament approving the use of capital controls and closing insolvent banks. That raised expectations the country would be able to secure a bailout from the IMF/EU/ECB. Negotiations to that end are currently in progress and need to be concluded before tonight when the ECB has threatened to cut off emergency liquidity to the banking system. A failure to agree with the troika, though, could lead to speculation of a euro-exit. The S&P500 closed 0.7% higher, Brent oil up 0.2% and copper up 0.9%.
Interest rates: The US 10yr treasury yield initially rose from 1.90% to 1.94% but caution over the final Cyprus outcome kept it to a 1.93% close. Eurozone peripherals were little changed. Australia’s 3yr bond yield was also retrained, ranging between 2.99% and 3.03%, while the 10yr yield ranged between 3.55% and 3.59%.
Currencies: The US dollar index fell around 0.4%. EUR outperformed on the Cyprus development despite a disappointing German business confidence survey, rising from 1.2890 to 1.3010. It opened weaker this morning at 1.2961 on jitters around Cyprus’ negotiations. USD/JPY remained heavy, ranging between 95.03 and 94.20. AUD rose from 1.0423 to 1.0460, but opened weaker today at 1.0440. NZD rose from 0.8308 to 0.8363, opening today at 0.8318. AUD/NZD fell from 1.2550 to 1.2495. CTFC futures reports told us that as at last Tuesday AUD longs were increased while NZD longs were reduced, EUR shorts were increased, and JPY shorts were reduced.
No US data to report
UK AAA rating on negative watch by Fitch
Cyprus: no Russian deal; ECB funding of Cypriot banks to end Monday if no bailout agreed; EU/IMF/ECB/Cyprus talks continue.
German Ifo business climate index falls from 107.4 to 106.7 in Mar. Only 2 of the 42 forecasts for IFO were not higher than the 106.7 outcome (Westpac and one other), which shows that our pessimism on things European is not yet shared by the consensus among economists on the Continent, even though German businessmen seem to be worried about the implications of recent events in Italy, Greece and now Cyprus. The first IFO fall in 5 months was mostly driven by expectations though the current index slipped as well.
Event risk today: The local calendars are empty today, all eyes likely to be on the Cyprus/IMF/EU/ECB negotiations over the bailout. A failure to agree with the troika could lead to speculation of a euro-exit. Tonight NY Fed Governor Dudley speaks in NY, and Bernanke speaks in London with others on the crisis.
NZD/USD 1 day: 0.8300 should provide support today for a push above 0.8365. Following that, a deeper correction below 0.8300 is expected.
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 1bp at 2.90%.
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: 1.0420 should provide support today for a push above 1.0460. Following that, a deeper correction below 1.0400 is expected.
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 25 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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