Wednesday May 8, 2013 - 20:21:30 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Westpac Morning Report
Morning Report Thursday 9 May 2013
Global market sentiment: The S&P500 continued its pattern of consecutive daily record highs, nudging 0.3% higher, while the Eurostoxx 50 closed up 0.6%. There was little data of note, although suggestions from ECB’s Mersch that ECB securitisation of loans may help the transmission of cheap money to Eurozone corporates helped sentiment. As did China’s strong trade data earlier. That particularly helped commodities, the CRB index up 0.6% and copper bouncing 2.0% to a 3-month high.
Interest rates: US 10yr treasury yields initially pushed higher with risk sentiment to 1.80% but fell during the London afternoon to 1.75% as bargain-hunters stepped in. The10yr auction, like yesterday’s 3yr affair, was mediocre, with a bid-cover ratio of 2.7 (vs 2.9 12mth average). Australian 3yr government bond yields consolidated the post-RBA decline, ranging between 2.48% and 2.53, while the 10yr yield initially made a fresh high for the week at 3.16% before slipping back to 3.11%.
Currencies: The US dollar index fell around 0.4%. EUR rose from 1.3090 to 1.3194, helped by Mersch’s comments. The Norwegian krone was the standout performer overnight, USD/NOK falling 2.0% after the central bank retained its distant tightening bias (noting currency weakness this year). USD/JPY did little between 98.60 and 99.00. AUD consolidated its multi-week decline, bouncing off 1.0155 to 1.0208. NZD similarly ranged between 0.8372 and 0.8414. AUD/NZD slightly extended its earlier bounce (fed by RBNZ intervention comments) to 1.2170.
No US data to report.
Canadian housing starts down 3.5% in April. Single family house starts fell 0.9%, their third fall in four months, to be down 15.7% yr.
German industrial production rose 1.2% in March, on top of a 0.6% February gain. These were the first back to back gains in IP since Apr-May 2011, somewhat surprising given recent weakness in the German factory PMIs, but consistent with orders gains in the same months. The detail showed manufacturing up 1.4%, energy up 4% (it was very cold) and construction down 3.1% in March. Despite the recent gains, IP is still contracting on an annual basis, at –2.5% yr.
UK BRC same store sales fell 2.2% yr in April, an extraordinarily weak pace probably due to the cold snap and snow disruption and timing of Easter. The last time sales fell at a similar pace was due to Jubilee or Royal Wedding disruption. Also the Halifax reported house price inflation accelerated to 2.0% yr in April, its fastest since late 2010.
Event risk today: It’s a double header in the Antipodes today, employment reports from both NZ and Australia released today. Westpac economists expect an improvement in both cases and are slightly above consensus. There’s also China’s CPI to watch, plus the BOE tonight.
NZD/USD 1 day: Looks heavy and 0.8360 appears vulnerable, but today’s labour data will decide.
NZD/USD 1-3 month: The uptrend since June 2012 remains intact, 0.8675 targeted next.
AUD/NZD 1 day: The long-awaited upward correction has begun, targeting 1.2230 over the next few days.
AUD/NZD 1-3 month: The trend decline to sub-1.1960 should resume once this corrective bounce is complete. Relative fundamentals (e.g. RBA easing to 2.0% vs RBNZ stuck at 2.5%) favour the NZD medium term.
AUD/USD 1 day: Looks heavy and 1.0155 appears vulnerable, but today’s labour data will decide.
AUD/USD 1-3 month: The sideways consolidation since August 2012 remains in progress. Within that, the multi-week outlook is negative, the sustained break below key 1.0220 pointing to 1.0100.
NZ 2yr swap yield 1 day: Should open 1bp higher at 2.80%.
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 9 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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