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ANZ Daily Markets Review

Contributor:
Fuseworks Media
Fuseworks Media
ANZ Daily Markets Review

CURRENCY: An extended NZD is likely to remain so given the move above 0.8025 in the European session overnight. Any dips closer to 0.8000USD may find willing buyers as markets await Australian Q1 CPI today.

RATES: Expect interest rates to open broadly unchanged, but with a bias to the downside following moves lower in US bond yields. National Bank Business Outlook data later today will be keenly eyed.

REVIEW CURRENCY: An extremely quiet start to the week in the local session. The European session however uncovered further demand from Asian Central Banks who drove the EUR higher taking the AUD and NZD along for the ride.

GLOBAL MARKETS: Major Northern Hemisphere equity markets posted solid gains overnight, taking the S&P 500 back above the year's prior high, seen in early April, and to its highest level since June 2008. The AUD made another new post-float high above 1.0785 on comments from the Chinese Vice-Premier in support of a free trade agreement with Australia. Commodity markets were mixed.

KEY THEMES AND VIEWS Overnight data fails to excite ahead of fomc. Data during the Northern Hemisphere session were second-tier and did not elicit much of a reaction on markets ahead of tomorrow's FOMC decision, and inaugural Bernanke press conference. US consumer confidence improved, but remains weak, and while markets glossed over the data, some of the components are mildly worrying. Indeed, year-ahead inflation expectations did ease to 6.3% following a surge in March to 6.7%, but they remain high in level terms, and this is something that has the potential to gnaw at the bond market. Meanwhile, the Richmond Fed Manufacturing Index halved to +10 in April, with significant falls in new orders and shipments. And with the housing market in a severe funk, it was not surprising to see S&P/Case-Shiller house prices continue to ease in February, albeit at a slower monthly pace.

other events and quotes

* US Treasury Secretary Timothy Geithner said that it will always be in the US interest to have a strong US dollar. Moreover, he said that the US will never engage in strategy to drive the dollar lower to gain a trade advantage. Geithner also appeared supportive of much-needed tax hikes to get the US debt problem under control, stating that Republicans will need to solve their no-new-tax pledge.

* ECB President Jean-Claude Trichet stated that while he is yet to see second-round effects of higher wage demands materialising in the euro zone, there is no time for complacency. There is still a risk that second-round effects from higher inflation may appear, and that it is essential to avoid them. Nonetheless, he does not see inflation expectations becoming unanchored. Moreover, Trichet again spoke in support of the US dollar, stating that a strong dollar is in the interests of the US.

* BoE hawk Sentance said that the BoE have allowed GBP to depreciate more than needed to support growth. He worries that the Bank's commitment to its 2% inflation target has already been eroded by not raising rates. He also said he was not surprised to see softer consumer spending due to higher VAT and inflationary pressures squeezing incomes.

NZDUSD: Confidence Locally it will be about the NBNZ April business survey due later today. Any pickup on this side will only cement recent NZD moves. With many holding on the hope of deeper corrections lower, NZD dips will continue to remain well supported. Any advance through 0.8080 will only speed the move to the post float high.

Expected range: 0.8005 - 0.8095

NZDAUD: Struggling Closely watched Australian inflation data today is again likely to limit topside attempts for the NZD. With the 200 hour moving average dropping to 0.7485 expect this level to cap moves on the topside today.

Expected range: 0.7444 - 0.7485

NZDEUR: Debt decisions Increasing EU sovereign funding costs at some point should dent the fortunes of the EUR. While this may provide further lifts in this cross towards the mid 0.55EUR area it is unlikely to be able to attain such levels today as the German preliminary Q1 GDP release tonight and results of the US FOMC meeting early tomorrow are eagerly awaited.

Expected range: 0.5478 - 0.5518

NZDJPY: Support evident Further attempts to break lower on this cross were thwarted around support at 65.19 in yesterday's local trading session. Overnight the stability of the JPY surprised leaving the NZD to guide direction on this cross. Resistance around the early 66JPY area should hold things again today providing the NZD can remain below resistance at 0.8080.

Expected range: 65.35 - 66.14

NZDGBP: Lacking enthusiasm Early in the week blues for the GBP have ensured this cross initially moves towards the high 0.48GBP. With preliminary UK Q1 GDP due tonight any bright news will help to cap things in the 0.48GBP zone for now.

Expected range: 0.4845 - 0.4898

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