Tuesday March 26, 2013 - 19:39:55 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Westpac Morning Report
Morning Report Wednesday 27 March 2013
Global market sentiment: Rosy US data helped lift sentiment last night, although Europe again dragged. US durable goods and house prices beat consensus estimates and pushed risky markets higher, disappointing consumer confidence and new home sales reports only denting the rallies. More hurtful was news the European Parliament is pushing for deposits above EUR 100,000 to be explicitly subject to haircuts in future. Fitch put Cyprus’ B rating on negative watch but Standard & Poor’s already has CCC so the move was ignored. The S&P500 is currently up 0.6%, while the CRB commodities index is up 0.5%.
Interest rates: The US 10yr treasury yield initially firmed from 1.92% to 1.94% but later fell to 1.90%. A 2yr auction was surprisingly disappointing given the recent Eurozone news, the bid-cover at 3.3 (vs 3.8 average). Australia’s 3yr bond yield fell from 3.06% and 2.99%, while the 10yr yield fell from 3.61% to 3.54%.
Currencies: Largely restrained. The US dollar index tracked sideways in a narrow range. EUR fluctuated above a multi-month low between 1.2820 and 1.2890. USD/JPY ranged between 94.00 and 94.62. AUD rose from 1.0460 to 1.0497 – a two month high – before retreating to 1.0470. NZD similarly rose from 0.8345 to 0.8387 – a one month high. AUD/NZD initially rose from 1.2520 to 1.2555 but then fell to 1.2500.
US durable goods orders jumped 5.7% in Feb, reversing their –3.8% Jan decline (revised from –5.2%). The detail: aircraft up 95%, autos up 4% but core capital goods down 2.7%, though that followed a 12% rise in the previous four months. Even so core orders were down 3.5%yr. Defence has been up and down like a yoyo lately. The true subdued orders picture is only revealed when looking at the annual growth rates. The apparent pickup in orders (and jobs, business surveys, etc) since late last year is barely getting them back to where they were running a year ago, which suggests it is mostly swings in the seasonal adjustment factors rather than underlying growth driving the orders profile month to month.
US new home sales fell 4.6% in Feb but have been ratcheting higher since Aug last year, alternating between rises and falls. The annualised sales pace of 411k in Feb compares to 366k a year earlier, a gain of 12.3% yr which followed a gain of 34% yr from the 273k sales nadir in Feb 2011. Even so those two years of recovery have only reversed 12% of the peak to trough sales drop since 2005. Lack of decent established homes for sale have helped the new build market along. Still on the housing market, S&P-CS house prices were up 8.1% yr, their fastest since 2006, with the monthly data showing gains for a year now.
US consumer confidence fell from 68.0 to 59.7 in Mar, according to the Conference Board (matching declines in the UoM and IBD-TIPP indices). The Mar fall reversed most of the Feb jump,and was led by expectations (down 11.5 pts) though the present index also fell (down 3.5 pts). The consumer assessment of the labour market was unchanged, indeed has barely moved since Nov last year.
US Richmond Fed factory index slowed from 6 to 3 in Mar, with shipments slowing, orders falling and jobs accelerating. A year earlier in Feb-Mar 2012 the index slowed from 12 to 7, so the turn of year upswing is less impressive this year than in 2012 and indeed than in 2011 and 2010.
UK CBI retail survey showed reported sales slowing from 8 to 0 in Mar, the weakest since Aug last year (weighed down by the Olympics).
Event risk today: NZ has monthly business confidence to watch today, as well as Fonterra’s six-monthly meeting which may announce a payout revision (Westpac economists forecast higher).
NZD/USD 1 day: Near term momentum remains positive and above 0.8385 is expected today.
NZD/USD 1-3 month: A sustained rise 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 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: Still awaiting a minor correction to below 1.0400 but near term momentum remains positive and above 1.0500 is possible first.
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 27 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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