Thursday April 11, 2013 - 20:24:20 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Westpac Morning Report
Morning Report Friday 12 April 2013
Global market sentiment: The bull run in equities continued. There was no major news catalyst last night, only a small improvement in US jobless claims and the earlier report from China of a pickup in lending to put a finger on. The ECB said in its monthly report that it is looking for signs of weakening inflation, interpreted by some as endorsing last week’s subtle easing signal. The S&P500 made a fresh record high and is currently up 0.4%.
Interest rates: The US 10yr treasury yield consolidated the week’s gains, ranging between 1.78% and 1.81%. The 30yr auction saw below average demand, making for a clean sweep of disappointing auctions this week . Eurozone peripheral yields were relatively stable, Spain’s 10yr initially making a 29-month low of 4.61%.Australia’s 3yr bond yield, which had earlier plunged 11bp in response to the disappointing employment report, consolidated between 2.76% and 2.81%. The 10yr, however, extended the domestic session decline from 3.34% to 3.28%.
Currencies: The US dollar index fell to a 4-week low amid the optimistic atmosphere. EUR rose from 1.3065 to 1.3138 (6-week high) and consolidated in NY. USD/JPY nudged to a fresh multi-year high of 99.95. AUD shrugged off the employment data blues and rose from 1.0520 to 1.0582 (3-month high) early London before consolidating. Outperformer NZD similarly rose from 0.8585 to 0.8676 – the highest level since 2 August 2011. The record high TWI will have tongues wagging about RBNZ intervention. AUD/NZD extended its month-long decline to 1.2180 and then consolidated to 1.2230.
US initial jobless claims fell 42k to 346k in the week ended April 6, more than reversing the Easter break seasonal distortion that saw claims jump 31k the week before, and leaving in place a mild down trend in claims since the start of this year, suggesting that there has been a modest reduction in layoffs at US firms in the past few months.
US import prices fell 0.5% in March, with petroleum down 1.9% and other import prices down 0.1%, to be down –0.2% yr (–2.7% yr total import prices). The dollar is little changed against the euro compared to last April but much stronger against the yen.
Canadian new house prices rose 0.2% in Feb to be up 2.1% yr, down from 2.6% yr in March last year really little changed since the post recession run up in prices in 2009 and 2010 when annual price inflation peaked at 3.3% yr.
The ECB monthly report reiterated a 1% growth forecast for 2014, and 1.3% inflation... we see growth of –0.5% and inflation at 1.2% (held up by euro depreciation) but falling further into 2015... on either view some form of policy easing is justifiable soon.
Event risk today: The domestic calendars are quiet (only NZ food prices) but there’s a large batch of US data to look forward to tonight, as well as much Fedspeak including Bernanke’s (although his is not on monetary policy and without Q&A).
NZD/USD 1 day: The rally from 14 March looks complete at 0.8676 (witness the parabolic move this week) and requires a correction towards 0.8450 before a fresh rally can commence.
NZD/USD 1-3 month: The 0.8840 post-float high is now in sight and could be exceeedd earlier than out previous prediction of H2 2013. The currency benefits from NZ’s strong fundamentals plus a resurgence of NZGB inflows.
AUD/USD 1 day: The rally from 8 April looks complete at 1.0582 and requires a correction towards 1.0500 before a fresh rally can commence.
AUD/USD 1-3 month: The break above a 2-year old consolidation triangle defined by around 1.0510 above and 0.9850 below argues for an eventual push beyond 1.0600 to 1.0850.
AUD/NZD 1 day: Downward momentum remains strong, the next downside target is 1.2140.
AUD/NZD 1-3 month: The trend decline to 1.2100 and lower has resumed.
NZ 2yr swap yield 1 day: Opening down 1bp at 2.88%.
NZ 2yr swap yield 1-3 month: The downward correction which started on 15 Feb could yet extend lower to the 2.70%-2.80% area. As long as that area holds though, we expect an eventual rise above 3.20% based on NZ’s improving fundamentals and eventual RBNZ tightening.
Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 12 April 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
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