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ANZ NZ Morning Brief

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Fuseworks Media
Fuseworks Media


CURRENCY: The EM and Syrian situations remain drivers of currency markets. Indonesia has a special board meeting where policy to relieve stress is expected. NZ business confidence could add to the NZD picture today.

RATES: Kiwi rates are expected to open slightly higher in line with global moves, following the corrective rally over the past week.


CURRENCY: India resumed FX swaps for state oil companies, relieving some pressure on the rupee as EM policy action swings into action. Carney provided more M2 liquidity by lowering UK bank liquid asset requirements.

GLOBAL MARKETS: All eyes were on Syria in early London trading, although European equities recovered earlier losses to end only slightly in the red with bond markets reversing the previous day’s moves. The German Dax ended down 1%, while Italy’s main bourse gained 1% on an apparent ruling that would see cancellation of part of the unpopular property tax. US stocks added 0.4% heading into the close as Syria-related safe-haven buying subsided. Sovereign bond yields were also higher across the board (barring Italy) with US 10yr yields rising 7bps to 2.78%, while yields in core European markets ended 3-4bps higher. Markets were little impacted by the news that the UK presented a proposal to the UN "authorising all necessary measures" be used to protect Syrian civilians. In currency markets, GBP rallied on a speech from BOE Governor Mark Carney that was less dovish than expected. AUD was weaker, although bounced off lows at 0.89, while the Indian Rupee slipped another 4% against the USD to fresh all-time lows. NYMEX Crude prices rallied 0.9% to be touching 18-mth highs at around US$110/barrel.


LITTLE NEW FROM BOE GOVERNOR CARNEY’S MAIDEN SPEECH: Short-end UK interest rates rallied ahead of Governor Carney’s maiden speech but yields quickly reversed earlier moves as the Governor was less dovish than expected. While taking the opportunity to clarify the BOE’s new forward guidance, Carney also sounded a little more optimistic on the UK economic outlook. Relaxation to bank liquidity holdings were aimed at stimulating lending and boosting the money supply. However, he stressed that the Bank Rate was on hold at 0.5% until unemployment reached 7% (viewing this level as a threshold, not a trigger), which was not forecast for at least three years. Carney assigned only a one-in-three chance that unemployment would fall at a faster rate. GBP/USD rallied almost a cent to 1.5550, although much of the move was attributed to short covering. It appears greater emphasis is being placed on growth until a sustainable recovery is achieved, with inflation to be lowered to its 2% target more slowly in order to avoid unnecessary volatility in output.


- Euro area M3 growth decelerated to 2.2% in the year to July (from 2.4% in June and 4% in late 2012). Private sector loan growth fell 1.9% y/y in July, illustrating the difficulties facing European banks. Household deposit growth was stable at 3.9%y/y and that of non-financial corporations slight higher at 5.7%y/y in July, indicating some improvement in bank funding positions.

NZD/USD: Business confidence...

Pressure on NZD remains in the form of EM capital concerns and Syrian intervention. However, India announced policy last night to remove oil related pressure on INR, and today Indonesia has a special board meeting where policy is expected to alleviate pressure on the IDR. The markets are also growing more comfortable that spill over from a Syrian response will be limited. Today’s ANZ business confidence may remind markets of the strong NZ data story and reinforce the range bottom.

Expected range: 0.7750 - 0.7830

NZD/AUD: No botulism…

News yesterday that there was no harm to health from recent food quality issues is reassuring and will reinforce support near 0.86 for this cross.

Expected range: 0.8660 - 0.8760

NZD/EUR: Not a driver…

European and NZ specifics was not a driver overnight as EUR weakness and NZD strength saw this cross regain some lost ground.

Expected range: 0.5810 - 0.5880

NZD/JPY: Too classic…

Markets concluded yesterday’s move in NZD/JPY was a reactionary response rather than a considered one, which drove a rebound off the lows overnight.

Expected range: 75.50 - 77.00

NZD/GBP: Broadside deflected…

As expected, BOE Governor Carney suggested the market had it wrong and there was only a minor chance of rates rising before 3 years. Also that if the market choked off the nascent recovery the BOE would provide more liquidity. He also reduced the liquid asset holding requirements for British banks in an attempt to stimulate M2 and M3 money supply. The market was comfortable with what was said and went back to pricing higher yields.

Expected range: 0.4990 - 0.5080

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