Monday April 22, 2013 - 21:18:51 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Morning Report
Morning Report Tuesday 23 April 2013
Global market sentiment: Equity markets remained in an optimistic mood despite being briefly dented by weaker US data overnight. The S&P500 recovered from disappointing home sales and national activity reports to be up 0.6% currently. The Italian index closed up 1.7% in response to the election of its president (seen as potentially hastening the formation of a government). Gold slipped during the London afternoon to be +1.5% on the day.
Interest rates: The US 10yr treasury yield fell from 1.73% to 1.68% during the London afternoon, the slide starting well before the US data disappointments. Italy’s 10yr yield gapped 17bp lower and Spain’s 10yr fell 13bp – both to two-year lows. Australia’s 3yr bond yield fell from 2.71% and 2.65% the 10yr from 3.22% to 3.16%.
Currencies: The US dollar index rose and fell for little net change overnight. EUR initially fell from 1.3075 to 1.3015 before recovering in NY to 1.3069. ECB member Constancio kept easing expectations alive. USD/JPY failed to reach the 100 level, retreating instead from 99.90 to 98.98. AUD mimicked EUR, initially falling from 1.0285 to 1.0236 – a one-month low – before recovering to 1.0277 in NY. NZD similarly fell from 0.8462 to 0.8398 before bouncing to 0.8422. AUD/NZD briefly spiked lower from 1.2210 to 1.2160.
US existing home sales fall 0.6% in Mar and Feb gain revised down from 0.8% to 0.2%. The March annualised sales pace of 4.92mn is 0.8% below the three year high point for sales of 4.96mn seen In November last year (and excluding the late 2009 surge in sales ahead of the temporary home-buyer tax credit expiry, Nov was the highest sales pace since mid 2007, but still 32% below the Sep 2005 sales peak of 7.25mn. Recent sales strength is believed to be in part driven buy investor groups snapping up cheap homes which offer decent rental returns at the moment.
US Chicago Fed national activity indicator slowed from 0.76 to –0.23 in Mar. This index is based on 85 data series and is effectively a coincident index of the economy. It has been more volatile than usual in recent months, having peaked at 0.86 in November last year before falling to –0.56 in January.
Euroland consumer confidence improved from –23.5 to –22.3 in the April advance report, its highest since July last year. The index has risen every month since bottoming at –26.7 in November, its post 2008-09 recession low, but remains well below the 2010-11 highs around –10.
Italian politics: 87 year-old Giorgio Napolitano was re-elected as Italian president for another 7 year term after Pier Bersani stepped aside as Democratic Party leader, having failed to organise a coalition government after the February elections gave him a partial victory. There are hopes that an administration can now be formed from the remnants of the DP in alliance with the People of Liberty Party, led by none other than three times former prime minister 76 yo Silvio Berlusconi. With the new pope around the same age Italy remains a gerontocracy!
Event risk today: Today’s highlights should be the China PMI (HSBC version) and then Euroland PMI’s.
NZD/USD 1 day: We remain on watch for a break below the key 0.8380 during the days ahead.
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: Downward momentum has waned, indicating the selloff is ripe and a correction is due.
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 unchanged 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.
AUD/USD 1 day: A corrective bounce today to around 1.0350 should be followed by a push below 1.0235.
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 23 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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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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