Monday May 6, 2013 - 20:40:04 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Morning Report
Morning Report Tuesday 7 May 2013
Global market sentiment: The overnight session was uneventful for markets. London and Tokyo were on holiday and there were no significant announcements. Post-US payrolls effects helped nudge the S&P500 0.3% to a fresh record high but the Euro Stoxx 50 closed down 0.5%, the data there (PMI, retail sales, investor confidence) mixed. Commodities were subdued apart from Brent crude which rose 1.2% on Israel/Syrian tension, copper down 0.4%.
Interest rates: US 10yr treasury yields rose from 1.73% to 1.775% - a fresh one-month high – on residual effects from last week’s strong US payrolls report plus pending supply ($72bn will be auctioned this week). Australian interest rates were restrained overnight, the 3yr government bond yield stuck between 2.56% and 2.58% while the 10yr ranged between 3.12% and 3.15%.
Currencies: The US dollar index is slightly firmer. EUR fell from 1.3120 to 1.3054, affected by ECB-head Draghi’s reiteration the door is open for more easing. USD/JPY ranged between 99.15 and 99.45. AUD slipped from 1.0291 to 1.0222, the weak monthly retail sales report weighing. NZD followed the AUD down, from 0.8550 to 0.8485. AUD/NZD nudged lower to 1.2011 – a four year low – and then consolidated between there and 1.2060.
The Fed’s Senior Loan Officer Survey found that banks continued to ease lending standards in the three months to April, particularly for commercial and industrial loans, in response to growing demand. However, only a few banks reported easing standards for home loans, although demand for prime loans continues to strengthen.
Canada building permits rose 8.6% in March, the third straight increase after slowing sharply in late 2012. Housing permits remain skewed towards apartments (up 13.4%), while single-family home permits fell 4.7%. Separately, the Ivey PMI fell to 52.2 in April, giving back most of the spike to 61.6 in March.
Euroland Sentix investor confidence rose from –17.3 to -15.6 in April. The Italian political deal and anticipation of an ECB rate cut will have helped to stabilise sentiment, but as yet hasn’t done much to boost it.
Euroland PMI composite was revised up from 46.5 to 46.9 in the final report for April. The index sits below its March quarter average, suggesting that the region is set for yet another contraction in Q2.
Event risk today: NZ secondary labour reports today will probably attract little market attention, the local highlight being the RBA meeting where the market is pricing in a 50% chance of a 25bp cut. Westpac’s economists expect it will be a close call but opt for a June cut instead. Australia’s trade balance is also released today.
NZD/USD 1 day: 0.8550 should cap the NZD today for a push lower to test 0.8455.
NZD/USD 1-3 month: The uptrend since June 2012 remains intact, 0.8675 targeted next.
AUD/NZD 1 day: Any upside today should be limited to 1.2095, the key 1.2020 level below looking vulnerable. RBA today will be critical, guaranteeing a reaction either way.
AUD/NZD 1-3 month: The trend decline to 1.2000 (and below) remains in progress. Relative fundamentals (including RBA vs RBNZ) favour the NZD medium term.
AUD/USD 1 day: Remains vulnerable to breaking below 1.0220 but the RBA will decide – an on-hold decision would probably push it above 1.0280 first.
AUD/USD 1-3 month: The sideways consolidation since August 2012 remains in progress. Within that, the multi-week outlook has just flipped back to negative, a break below key 1.0220 then pointing to 1.0100.
NZ 2yr swap yield 1 day: Opening 1bp higher 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 in 2014.
Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 7 May 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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