Sunday April 28, 2013 - 22:32:36 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Westpac Morning Report
Morning Report Monday 29 April 2013
Global market sentiment: A 5-day rally in US equities ended on Friday. The S&P500 closed 0.2% lower, while the Eurostoxx 50 closed down 0.8% and the Shanghai Composite fell 1.0%. The CRB commodities index fell 0.6%, copperís -1.6% and aluminiumís -3.5% notable. Helping dampen the weekís optimistic tone were ECBís Asmussen, who warned about the risks of keeping rates too low, Spain downgrading its fiscal forecasts, and US GDP for Q1 which missed estimates (2.5% vs 3.0% annualised). US consumer confidence was an upside surprise though.
Interest rates: The US 10yr treasury yield fell from 1.70% to 1.66% amid the risk averse tone. Australiaís 3yr bond yield fell from 2.60% to 2.55% - a five-month low - while the 10yr fell from 3.16% to 3.10% - not quite breaching the 24 April low of 3.09%. The Australian 3-10yr swap curve flattened by 4bp to 76bp.
Currencies: The US dollar index fell about 0.3% following the disappointing GDP data. EUR traded sideways in a 1.2991-1.3037 range, only briefly supported by Asmussenís remarks. The yen outperformed after the BOJ meeting failed to deliver the expected high inflation forecasts, USD/JPY falling from 98.85 to 97.56. AUD extended its domestic session decline to 1.0263 early London and then traded sideways. NZD fell from 0.8536 to 0.8470. AUD/NZD made a fresh post-October 2009 low at 1.2050 before bouncing to 1.2135 in NY. The weekly speculative futures positioning report showed AUD and NZD longs reduced and JPY shorts reduced.
US Q1 GDP grew 2.5% annualised, just above our 2.3% forecast with inventories adding
1 ppt but net exports subtracting 0.5 ppts the main departures from our forecast of 0.0 ppts contribution from both. As expected, consumer spending accelerated to 3.2%, its fastest in two years, and housing growth moderated to a still healthy 12.6%, but business investment growth slowed from 13.2% to 2.1% and a further steep fall in defence spending saw government shave 0.8 ppts off the GDP bottom line (though not as much as in Q4 and less then we had expected). The core PCE deflator edged up to 1.2% but it has averaged 1.1% for the past three quarters which is indicative of possibly too mild inflationary pressure. That, coupled with annualised growth of around 1.5% in the latest half year, is why Fed policy remains so accommodative!
US Uni of Michigan consumer sentiment April revision is due later this afternoon.
Euroland money supply M3 growth decelerated from 3.1% yr to 2.6% yr in Mar, its lowest since April last year and maintaining the downtrend since the cyclical high of 3.9% yr in Oct. Private sector loans continued to contract at a 0.8% yr pace.
Event risk today: The local calendars are devoid of market-moving events today. Tonight thereís US personal spending, home sales and the Fedís preferred core inflation measure (PCE deflator) to watch.
NZD/USD 1 day: 0.8500 should cap the kiwi today for a push below 0.8470.
NZD/USD 1-3 month: The uptrend since June 2012 remains intact as long as 0.8160 holds. The currency benefits from NZís strong fundamentals plus a resurgence of NZGB inflows.
AUD/NZD 1 day: This corrective bounce should not exceed 1.2175 today, eventually giving way to a decline sub-1.2050.
AUD/NZD 1-3 month: The trend decline towards 1.2000 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 NZís improving fundamentals and eventual RBNZ tightening.
AUD/USD 1 day: Vulnerable to falling below 1.0263 towards 1.0220 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 29 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 Westpacís
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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