Tuesday May 14, 2013 - 21:14:05 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Westpac Morning Report
Morning Report Wednesday 15 May 2013
Global market sentiment: US asset classes – equities, bond yields, and currency – all rose last night. Equities were fuelled by high-profile hedge fund manager David Tepper’s pronouncement that the US “is on the verge of an explosion of greatness” and that bank stocks were attractive. Also helping sentiment was Fitch’s two-notch rating upgrade for Greece, from CCC to B-. The S&P500 made a fresh record high and is currently up 0.7%. Commodities were less enthused, the CRB index down 0.4% and copper futures down 2.1%.
Interest rates: US 10yr treasury yields extended the month’s gain from 1.90% to 1.96% - a seven-week high, Fed tapering concerns lingering. Fed hawk Plosser (and non-voter) argued for tapering to start in June given the improved labour market. The Australian 3yr government bond yield followed suit, rising from 2.55% to 2.62% while the 10yr yield rose from 3.21% to 3.29%.
Currencies: The USD index rose around 0.8% to a 10-month high, the currencies outperforming all the majors. EUR fell from 1.3029 to 1.2931. USD/JPY rose from 101.30 to 102.40 – a five-year high – on expectations of further stimulus this Friday. AUD extended its multi-week slump from 1.0003 to 0.9877. NZD fell from 0.8302 to 0.8181. AUD/NZD remained in a 1.2020-1.2090 range.
US NFIB small business optimism rise from 89.5 to 92.1 in Apr, its highest since October last year, but still down from its recent peak at 94.5 in April last year. The detail included a jump from 0% to 6% in the net balance of firms planning to take on new employees.
US import prices fell 0.5% in Apr, mostly due to lower petroleum prices although excluding that component prices fell 0.1% for the second month running and have not posted a rise since Jan, as sign that US dollar appreciation is having a disinflationary impact.
Canadian house prices rose 0.2% in April for a 2.0% yr annual pace of growth, the slowest for the Teranet-National Bank series since 2009.
Euroland industrial production rose 1.0% in March, in line with Westpac’s top of the market forecast, for an annual pace of contraction of –1.7% yr. In March Germany and Spain both saw gains of around 2%, offsetting industrial contractions of about 1% in France and Italy.
German ZEW analysts’ expectations were little changed at 36.4 in May from 36.3 in April, and the current situation index slipped from 9.2 to 8.9, its second fall in a row. In contrast expectations for the broader eurozone improved from 24.9 to 27.6 after falling in two steps from the recent peak of 42.4 in Feb.
UK house price optimism returns. The RICS (chartered surveyors) reported a net balance of 1% recording higher house prices in their April survey, the first positive outcome since mid 2010.
Event risk today: Australia has vehicle sales and wage costs, and there’s a large batch of data from the US tonight as well as Eurozone GDP.
NZD/USD 1 day: 0.8260 should cap it today, 0.8160 beckoning.
NZD/USD 1-3 month: The uptrend since June 2012 has been broken, targeting 0.8160 next and 0.7800 if that goes. Local fundamentals remain supportive but extreme long speculative positioning warns of a cleanout.
AUD/NZD 1 day: Consolidation persists.
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: This decline could extend to 0.9835 before a decent correction sets in.
AUD/USD 1-3 month: The multi-week outlook remains bearish, despite reaching our 0.9900 target earlier than expected. Below 0.9880 would then target 0.9580.
NZ 2yr swap yield 1 day: Should open up 2bp at 2.87%.
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 15 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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