Monday May 20, 2013 - 20:14:51 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Westpac Morning Report
Morning Report Tuesday 21 May 2013
Global market sentiment: It was a quiet night. There were no data releases of note for global markets, markets seemingly content to remain on hold until Fed Chairman Bernanke’s important speech on Wednesday. The S&P500 initially made a fresh record high but is currently down 0.1%. Thr CRB commodities index is up 0.4% (copper futures up 0.9%, gold +1.5%).
Interest rates: US 10yr treasury yields remained elevated around 1.97%, aside from a temporary dip to 1.92%. Fed dove and voter Evans said US economic data had been mixed but was overall a little more upbeat than usual, helping maintain the tension in the bond markets.
Australian government bond yields remained in consolidation mode following April’s large decline, the 3yr ranging between 2.51% and 2.56% and the 10yr ranging between 3.18% and 3.24%.
Currencies: The US dollar index reversed lower as speculative longs took profit. EUR rose from 1.2840 to 1.2900. USD/JPY fell from 102.80 to 102.17. AUD rose from 0.9753 to 0.9827. NZD rose from 0.8109 to 0.8180. AUD/NZD remained consolidative between 1.1990 and 1.2030.
The Chicago Fed national activity index eased further in April, to -0.53 from -0.23. The index aggregates a large number of already published indicators. An outturn below zero indicates below-trend growth.
Event risk today: Today’s local highlight will be the RBA minutes (from 7 May meeting) which will be combed for clues to any follow-up rate cut. NZ has migration. There’s Fedspeak tonight from NY’s Dudley (dove and voter).
NZD/USD 1 day: The corrective bounce we have been waiting for started yesterday and targets 0.8250 next.
NZD/USD 1-3 month: The uptrend since June 2012 has been broken and a decline towards 0.7800 is looking increasingly likely. Local fundamentals remain supportive but extreme long speculative positioning warns of a cleanout.
AUD/NZD 1 day: Still correcting April-May’s large decline, and should reach 1.2130.
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: The corrective bounce we have been waiting for started yesterday and targets the 0.9840-0.9920 area next.
AUD/USD 1-3 month: The contracting range since July 2011 is in the process of breaking down, 0.9600 the next major target. The Australian data flow is unsupportive, and the RBA is likely to ease further to 2.0% by Q1 2014.
NZ 2yr swap yield 1 day: Taking the lead from Australian bond yields overnight (see above) it should open unchanged at 2.89%.
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 21 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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