Wednesday April 17, 2013 - 21:15:55 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Westpac Morning Report
Morning Report Thursday 18 April 2013
Global market sentiment: The slide in sentiment, which started last Friday, extended last night. Contributing to the moves were disappointing US company earnings results (Bank of America notable), ECB Council member Weidmann saying further easing may be necessary, the Swedish central bank lowering its interest rate forecast, and Rincin-laced letters received at the US Senate building. The S&P500 is currently down 1.5%, and the CRB commodities index is down 0.8% (futures for Brent oil -2.1%, copper -3.8% to a fresh 18-month low, and gold -0.3%).
Interest rates: The US 10yr treasury yields fell from 1.73% to 1.67% and rebounded to 1.70%, probing key yield support for the third time this month. Eurozone peripheral bond yields fell after Italian and Slovenian auctions went well. Australia’s 3yr bond yield fell from 2.76% to 2.67%, while the 10yr fell from 3.28% to 3.18%.
Currencies: The US dollar index reversed sharply higher. EUR fell from 1.3200 to 1.3000, forming a technically bearish key reversal day, Weidmann’s comments a catalyst. USD/JPY initially fell from 98.40 to 97.20 but rebounded in NY to 98.00. AUD fell from 1.0376 to 1.0277 – a one-month low. NZD fell from 0.8490 to 0.8428. AUD/NZD extended its month-long slide to 1.2175.
No US data to report, although the Fed’s beige book regional economic assessment is due out at 1800 GMT.
Bank of Canada on hold at 1.0% and mild tightening bias language maintained: “the considerable monetary policy stimulus currently in place will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required, consistent with achieving the 2 per cent inflation target.” Meanwhile house prices rose at a 2.6% yr annual pace, their slowest since the economy emerged from recession in 2009.
UK employment fell 2k in the 3 months to Feb, the first quarterly decline since mid 2011, despite very patchy economic growth over that period. The unemployment rate rose from 7.7% in the qtr ended Nov to 7.9% in Feb. Average weekly earnings growth slowed to just 0.8% yr, equal lowest since the 2009 recession and ex bonus the 1.0% yr rate in Feb was the lowest on record. The only bright spot in the report was a 7k fall in the benefit claimant unemployment count in March, the fifth in a row.
Bank of England minutes to the April MPC meeting once again show a 6:3 vote in favour of no further asset purchases; the minority, including Governor King, preferring a further £25bn. The reworked inflation remit had no material impact on the policy decision.
Event risk today: Monthly consumer confidence reports are released in both NZ and Australia today – neither being major market-movers.
NZD/USD 1 day: We favour a push below 0.8380 today.
NZD/USD 1-3 month: The uptrend since June 2012 remains intact as long as 0.8160 holds. The currency benefits from NZ’s strong fundamentals plus a resurgence of NZGB inflows.
AUD/NZD 1 day: We favour a push below 1.2175 today.
AUD/NZD 1-3 month: The trend decline to 1.2100 and lower remains in progress. Relative fundamentals (including RBA vs RBNZ) favour the NZD medium term.
NZ 2yr swap yield 1 day: Opening down 1bp at 2.86%.
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.
AUD/USD 1 day: We favour a push below 1.0277 today.
AUD/USD 1-3 month: The sideways consolidation since August 2012 remains in progress. Within that, the multi-week outlook is negative.
Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 18 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
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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