Wednesday August 7, 2013 - 21:16:31 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Westpac Morning Report
Morning Report Thursday 8 August 2013
Global market sentiment: US equities again fell amid increasing pro-tapering commentary. Following Evans and Lockhart the previous day, Fed dove Pianalto said she is prepared to taper if the labour market remains on the path of improvement, although added it hasn’t fully recovered yet. The S&P500 is currently down 0.4%, perhaps also influenced by the earlier 4.0% fall in the Nikkei 225.
Interest rates: US 10yr treasury bond yields ground lower throughout the session, from 2.64% to 2.59%, despite the Fed rhetoric over the past two days. A 10yr auction was mixed, awarded at market yield but with a 2.5 bid-cover ratio – the lowest since 2009.
Australian 3yr government bonds yields fell from 2.54% to 2.50%. The 10yr yield fell from 3.72% to 3.67%.
Currencies: The US dollar index fell to a one-month low. EUR rose from 1.3266 to 1.3342. Fitch affirmed Germany’s AAA rating. GBP surged after the BOEs forward guidance thresholds were read as looser than expected. Combined with recent strong economic data, a sceptical market pushed GBP from 1.5206 to 1.5531. USD/JPY made a one-month low of 96.33. AUD rose from 0.8920 to 0.9025 – a five-day high. NZD similarly rose from 0.7883 to 0.7998. AUD/NZD fell from 1.1350 to 1.1268.
Event risk today: The local highlight today will be Australia’s labour data for July. Westpac expects -5,000 jobs vs +6,000 consensus. Later, China releases its trade balance.
NZD/USD 1 day: Should this upward correction persist, the next targets are 0.8000 and 0.8100.
NZD/USD 1-3 month: The downtrend since April should resume (confirmed by a break below 0.7684) and could run as far as the low 0.70’s. Fed tapering expectations will remain a depressant.
AUD/USD 1 day: Should this upward correction persist, the next targets are 0.9070 and 0.9125.Employment today is a major risk.
AUD/USD 1-3 month: The downtrend since April has resumed and targets the low 0.80’s eventually. The Australian data flow is unsupportive, and the RBA is likely to ease further to 2.0% by Q1 2014.
AUD/NZD 1 day: Below 1.1230 signals this five day consolidation is complete and the downtrend is resuming. Australia’s employment today is a major risk.
AUD/NZD 1-3 month: The downtrend since March remains strong and targets 1.1000 during the months ahead. Relative fundamentals (e.g. RBA easing to 2.0% vs RBNZ stuck at 2.5%) favour the NZD medium term.
NZ swap yields 1 day: In response to changes in US and Australian bond yields overnight (see above) the 2yr should open down 1bp at 3.36%. The 10yr should open down 4bp at 4.63%.
NZ swap yields 1-3 month: The uptrend since June 2012 remains intact. By late-2013 we would expect to see the 2yr above 3.40% based on NZ’s improving fundamentals and eventual RBNZ tightening in 2014. The US-influenced 10yr yield has also confirmed its uptrend and targets 4.68% next.
Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 8 August 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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