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ANZ NZ Morning Brief

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Fuseworks Media
Fuseworks Media


CURRENCY: ANZ forecasts Australian Q2 GDP to lift slightly to 0.7% q/q, with solid domestic demand likely to underpin the AUD. Services PMIs from Europe and UK should remain strong, but EUR has been declining in the face of strength of late.

RATES: There was some payside action in kiwi rates overnight. NZ yields are expected to open about 2-3bps higher.


CURRENCY: AUD has been strong with the RBA reverting to a more neutral bias. Overnight though the baton was passed to USD as the ISM confirmed USD manufacturing strength.

GLOBAL MARKETS: Better US data overnight continued to strengthen the case for tapering later this month, but jitters remained on western military intervention into Syria. Headlines that missiles had been detected flying toward the east Mediterranean sent jitters through markets. Newswires later clarified that these had come from a joint US/Israeli defence test though. President Barack Obama is urging Congress to take a "prompt" vote authorising military action, which appears to have won support from the top two Republicans in the form of John Boehner and Eric Cantor, suggesting some sort of intervention is on the horizon. It appears that European equity markets took the brunt of the early headlines, and while they quickly bounced back, bourses then generally eased to close weaker. US equity markets also failed to maintain a strong start to be trading flat to 0.3% higher at the time of writing. EM currencies came under pressure against the USD after a couple of days’ reprieve. Syrian jitters and a better run of macro data (see below) supporting the USD. USTs sold off on the better data with 10-year yields reaching a high of 2.91% in the aftermath, but then settled back to be 2.85%, or +7bps from the previous close. The move up in UST yields triggered a broad step higher in European sovereign bond yields as well. Commodity prices found support led by precious metals and oil with silver, gold and oil up 3.7%, 1.2% and 0.9% respectively. GlobalDairyTrade prices were down, led by slightly weaker (-1.7%) wholemilk powder prices across all contract periods, apart from March 2014.


US data continues to point toward tapering. The August ISM manufacturing series was better than expected hitting a 28 month high of 55.7 (last 55.4, exp 54.0). Manufacturing activity looks to have strengthened in Q3 as the drag from fiscal tightening wanes. This coincides with the recent improvement in manufacturing PMIs for the euro-zone, China and the UK. Encouragingly new orders climbed sharply to 63.2 vs 58.3, implying firmer output gains ahead. Employment slipped by 1.1pts to 53.3, but export orders increased by 2pts to 55.5. The data suggests firmer US growth in Q3, is positive for the USD and strengthens the case for Fed tapering to commence later this month. Other US data showed a 0.6% rise in construction activity in July. This suggests the recovery in this sector remains intact despite softness in new home sales in July. Additionally there were strong upward revisions to previous months data, with June activity now reported as being flat versus an initial -0.6% m/m print, and May growth was revised up also.


- Australian Q2 GDP today. Our Australian team have revised up their Q2 GDP growth forecasts to be slightly higher than consensus at +0.7% q/q and +2.6% y/y.


The USD was stronger overnight as the ISM surprised to the topside. New orders and prices paid lifted strongly. Employment did dip by 1.1pts, but was still healthy at 53.3. Tonight the Beige book should continue the positive momentum story for the US. This cross was also under pressure courtesy of NZD/AUD flows.

Expected range: 0.7730 - 0.7860

NZD/AUD: Policy appropriate…

The RBA as expected left rates on hold, but also deemed policy to be "appropriate", a change from having "scope to ease". This has led to AUD buying and this cross has broken through the uptrend that has been in place since March, the 55 day moving average and horizontal resistance. If these are not quickly regained the next target is sub 0.85.

Expected range: 0.8560 - 0.8650

NZD/EUR: EUR still under pressure…

Pressure on NZD masked the fact that EUR remains under pressure and is now challenging the 200 day and 100 day moving averages against USD.

Expected range: 0.5870 - 0.5950

NZD/JPY: External factors.…

Both Yen and NZD are being driven by external factors with USDJPY the beneficiary of USD buying and NZD under pressure from NZD/AUD selling.

Expected range: 76.75 - 78.25

NZD/GBP: Great data…

The data in the UK continues to surprise positively with the construction PMI increasing further. Tonight’s PMI services is likely to continue that trend but GBP remains constrained by EUR declines.

Expected range: 0.4970 - 0.5050

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