Thursday April 18, 2013 - 20:55:03 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Morning ReportMarket wrap Global market sentiment: Asset class performances were mixed. US equities and interest rates are lower, as are the riskier currencies, but commodities are firmer (CRB index +0.7%, copper +0.3%, gold +0.9%). European markets were more upbeat than their US counterparts, the Eurostoxx 50 unchanged while the S&P500 is currently down 0.7%. Terror sensitivity remains a factor and US data (jobless claims, Philadelphia manufacturing survey) was disappointing. In Europe, though, successful Spanish and Slovenian bond auctions and Germany’s approval of the Cypriot bailout helped sentiment.
Interest rates: The US 10yr treasury yields initially rose from 1.69% to 1.72% but dropped during the London afternoon to 1.68%. Fed hawk Lacker’s call for an end to QE may have spooked equities but was ignored by treasuries. Australia’s 3yr bond yield fell from 2.69% to 2.64% while the 10yr fell from 3.21% to 3.16% - both probing multi-month lows.
Currencies: The US dollar index consolidated around the week’s high. EUR similarly ranged between 1.3027 and 1.3096. USD/JPY ranged between 97.80 and 98.52. AUD initially firmed to 1.0338 but fell during the London afternoon to 1.0281. NZD performed poorly, falling from 0.8470 to 0.8402. AUD/NZD bounced from 1.2180 to 1.2240.
US Philadelphia Fed factory index slipped from 2.0 to 1.3 in Apr, a subdued result but still holding above 0 after Jan and Feb readings were substantially weaker at –6 and –13. The April detail showed orders and jobs both slipping below 0 (to –1 and –7 respectively) but shipments accelerated further to 9.
US initial jobless claims rose 4k to 352k in the week ended 13/6, leaving in place a downtrend since the start of the year once seasonality distortions around new year and Easter are discounted.
US leading index down 0.1% in Mar, its first fall since Aug last year. Consumer expectations, the workweek, ISM orders, building permits and initial claims were all negative in March, offsetting gains in the other five components of the leading index.
UK retail sales fell 0.7% in March, to be down –0.5% yr. Very cold weather will have been a factor at play, as well as a correction from the Feb bounce from Jan’s snow affected sales. So difficult to get a clean read on retailing currently.
Event risk today: The economic calendars are devoid of market moving events today.
NZD/USD 1 day: We continue to favour a push below 0.8380.
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: This bounce should extend to 1.2260+ 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 2.84%.
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: A corrective bounce off yesterday’s 1.0269 low is in progress and could exceed 1.0350 today. Following that, the decline since 11 April should resume.
AUD/USD 1-3 month: The sideways consolidation since August 2012 remains in progress. Within that, the multi-week outlook is negative.
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