Tuesday April 30, 2013 - 20:17:11 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex- Morning Report
Morning Report Wednesday 1 May 2013
Global market sentiment: US equities nudged slightly higher (S&P500 +0.1%) while European counterparts did the opposite (Eurostoxx 50 -0.2%). US economic data was mixed, a disappointing Chicago PMI balanced by a strong consumer confidence report. Eurozone CPI inflation for Q1 at 1.2% was well below the 1.6% expected, though, and raised the chances of ECB easing on Thursday. Brent crude is down 1.6%, copper -1.3%, as commodities reflect on a weakening global economic data pulse.
Interest rates: The US 10yr treasury yield initially fell from 1.67% to 1.64% - a five-month low – but rebounded following the US consumer confidence data to 1.68%. Similarly, Australia’s 3yr bond yield initially fell to 2.51% - a six-month low – before bouncing to 2.56%, while the 10yr yield fell from 3.10% to 3.05% before rebounding.
Currencies: The US dollar index appeared stung following the Chicago PMI, falling to a two-month low. USD selling by fund managers at month end may also have been a factor. EUR rose from 1.3055 to 1.3186. USD/JPY spiked lower from 97.60 to 97.00. AUD was volatile, initially dipping to 1.0330 before making a 2-week high at 1.0385. NZD similarly dipped to 0.8543 before making a 2-week high of 0.8586. AUD/NZD ranged between 1.2060 and 1.2115.
US house prices accelerate to 9.3% yr in Feb, their fastest in almost seven years, according to the Case-Shiller 20 city index. Several factors would be driving this. There are only 1.93 million houses for sale on the market, the lowest in 13 years and equivalent to just 4.7 months’ supply at the current sales pace according to the National Association of Realtors (all time low was 3.6 months in 2005 before rising to 11.9 in 2010). Investors are snapping up houses which are still on average selling for 29% lower than when they peaked in 2006. To the extent that this encourages new build (and it has been), it is helpful towards eventually building a sustained economic recovery that does not require the life support policies of the Fed.
US Chicago Fed factory index dipped below 50 for first time since 2009 (from 52.6 to 49.0 in April) although it is worth noting that like has been the case with most other business surveys, early year strength in 2011 and 2012 was followed by lower readings in the second qtr. With Chicago, the early year peaks have been progressively lower, however. In 2011 it was 67.6; 2012: 61.5; 2013: 56.8. It is difficult to discern what is survey bias/seasonal distortion, and what is reflective of genuine economic conditions, month to month, but the Chicago profile since the recovery peaked in early 2011 has certainly lost momentum. The lesser watched Milwaukee PMI also dipped below 50, from 56.5 to 48.4, broadly matching the patterns displayed by Chicago since the 2009 recession, but with more volatility.
US consumer confidence bounced from 61.9 to 68.1 in April, reversing the 6.1 pt drop in March. The Conference Board index has swung around somewhat lately but basically held within the 58-73 range since early last year, after plunging from 112 to 25 between 2007 and 2009. The latest survey found expectations up almost 10 pts but the present index up just 1 pt. The job market assessment was less confident, slipping to a three month low at –27.3.
Euroland CPI flash estimate for April fell from 1.7% yr to 1.2% yr; the last time it fell to that pace was in early 2009 during the depths of the previous recession. With Euroland unemployment hitting a new all-time high of 12.1% in March, pressure is building on the ECB to cut rates this week, as a majority of economists now expect.
Event risk today: Australia’s PMI and housing data plus an RBA speech (Edey, regulation) will be followed by the more market sensitive China PMI (official version). The Fed’s FOMC meeting is likely to keep the status quo.
NZD/USD 1 day: As long as 0.8540 holds we’ll look for a push above 0.8586.
NZD/USD 1-3 month: The uptrend since June 2012 remains intact, 0.8675 targeted next.
AUD/NZD 1 day: The downtrend has stalled but near term clues will be provided by a break of either 1.2060 or 1.2115.
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 unchanged at 2.82%.
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 in 2014.
AUD/USD 1 day: As long as 1.0330 holds we’ll look for a push above 1.0385.
AUD/USD 1-3 month: The sideways consolidation since August 2012 remains in progress. Within that, the multi-week outlook has flipped to positive, targeting 1.0580.
Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at May 1 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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