ANZ Research
Thursday 16th February 2012 |
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OUTLOOK
CURRENCY: The impact of yesterday’s stunning NZ retail sales release should linger today, with underlying demand likely should the NZD dip closer to 0.8310. Today the NZD should remain within the familiar range.
RATES: Quiet night in kiwi overnight. We expect the NZ curve to open broadly unchanged.
REVIEW
CURRENCY: Another rocket under the NZD yesterday propelled it to a recent high overnight. With booster fuel running low it has subsequently eased back from the overnight highs.
GLOBAL MARKETS: Downbeat headlines on Greece contributed to ongoing negative market sentiment. The biggest moves were in FX markets, with the EUR weakening. Equities fell from highs earlier in the session, with the Euro Stoxx 50 up 0.2% in the European session. The S&P500 is up 0.3% from the previous session at the time of writing. Demand for safe-haven sovereign debt has seen bond yields ease in the US, Germany, UK, with bond yields moving higher in France, Italy, Spain and Greece. Iran tensions continue to provide support for crude oil prices (up 0.9%). Gold prices rose.
KEY THEMES AND VIEWS
GREEK DEAL UNRAVELLING. With the EU delaying a decision on the €130bn second Greek aid package till their February 20 meeting, tensions are building. Greek politicians remain unhappy at the stricter conditions being imposed, whereas Northern European politicians appear to be increasingly reluctant to provide additional funding. The dilemma for Eurozone parliaments (which include the increasingly obstinate German, Dutch and Finnish legislatures) that need to approve the funds is that they will not know for sure if Greece has lived up to its side of the bargain before they vote. While pledging that Europe’s common currency will “not fail under any circumstances”, German Finance Minister Schaeuble noted that the Eurozone is better prepared than in was in 2010 should a Greek default occur.
DATA TENSIONS. An improving US data run (with the US empire state back up to early 2010 levels, the NAHB survey of homebuilders sentiment rising by more than expected to its highest since 2007, and manufacturing production increasing 0.7% in January, confirms the US economy remains on the recovery path. However, Eurozone Q4 GDP fell 0.3% q/q, with contractions in Italy (-0.7% q/q), and Germany (-0.2% q/q) particularly notable. A better than expected Eurozone trade surplus was driven by a slump in imports - not a good sign for the health of domestic demand. The Greek economy contracted 7% in 2011, and Portugal by 2.7% y/y, which makes stabilising (or even cutting) debt to GDP extremely difficult. To avoid a debt trap the denominator needs to be your friend, but in this instance it is not.
OTHER EVENTS AND QUOTES
• Dallas Fed’s Fisher (non-voter). QE3 is a “fantasy of Wall Street” and Fed policy can’t sole “the employment problem”. This morning’s FOMC minutes (8am, NZ time) will shed more light on their thinking.
• Dairy prices down 3% at GlobalDairyTrade auction. The average winning price fell to US $3,545/tonne. Anhydrous milk fat prices slumped 10.5%, with whole milk powder prices were down 3%.
NZDUSD: Bought blindly…
Demand for the NZD was driven through resistance levels. The brief blip above 0.84USD overnight was short-lived but remains a possible target again today although market participants may well be on the alert for the NZ Budget Policy Statement at 11am today that should calm some enthusiasm.
Expected range: 0.8320 – 0.8410
NZDAUD: Take note…
Australian January employment data due this afternoon may well see this cross push higher towards key resistance at 0.7830. Getting past this level would require a reasonable fall in the full time employment component of the release.
Expected range: 0.7785 – 0.7835
NZDEUR: Pay up…
Concerns around the Greek PSI deal have ensured that the EUR remains pinned to support levels against the USD. Relative NZD strength has seen new records set on this cross with little likelihood of a retracement today.
Expected range: 0.6380 – 0.6430
NZDJPY: Tick off another target…
Having attained the 66.11 target overnight this cross should remain a lot calmer today. The NZD has done most of the work in attaining this target and now markets will spend a day resting.
Expected range: 65.10 – 65.90
NZDGBP: Close…
The break of resistance at 0.5305 led to an explosive move overnight. Today things will calm considerably for this cross.
Expected range: 0.5315 – 0.5365
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