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ANZ NZ Morning Brief

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Fuseworks Media
Fuseworks Media


CURRENCY: The FOMC rather than Q3 GDP will likely drive NZD today. ANZ expects a small Fed taper, or at the very least a strong indication that the taper is imminent. If this occurs it should continue to keep NZD/USD capped.

RATES: The FOMC at 8 am this morning NZ time will set the scene for where rates will open. Overnight markets priced in a slightly higher chance that the Fed will commence tapering.


CURRENCY: Sterling outperformed as UK unemployment dropped to a post crisis low of 7.4%, closer to the BOE’s 7% threshold. German confidence increased but the current assessment was weaker.

GLOBAL MARKETS: Its FOMC day with increasing expectations of a reduction in the Feds asset purchasing program. The consensus is for no taper, with the latest Bloomberg poll indicating 67 percent of respondents expect this to be the outcome. However, stronger data across the globe last night, which pushed yields higher, and an increasing number of research pieces calling for a small taper combined with stronger forward guidance highlights growing expectations of a change in stance. Our official house view is for a small USD10bn taper given the developments in US hiring and real economic activity despite the softness in inflation trends. Elsewhere markets did their best to hold steady overnight, but the strong data across the globe saw yields push higher, emerging-market currencies weaken and the main US equity bourses flat to down a touch. Commodities had a better data with the CRB index up 0.5% lead by increases in energy and oil prices.


UK LABOUR MARKET ON THE IMPROVE. The big surprise overnight was an impressive UK labour force report, which showed that the unemployment rate fell by 0.2ppts to 7.4% in the three months to October. This was mainly driven by a 250k rise in employment, of which 246k jobs were created in the private sector. Leading November data was also good, with jobless claims falling by 36.7k (exp: -35k) after a 42.8k decline in October. The underlying momentum suggests the unemployment rate is falling faster than expected towards the BoE’s 7% threshold for reassessing its monetary policy stance. The 7% threshold is the level at which the BOE will consider raising rates between one and three quarters of a percent. However, hitting the threshold in itself will not automatically trigger a rate increase. Other factors like the broader strength of the economy, inflation expectations, productivity growth, the flow of credit and strength of the banking sector will be important too. The better labour report lifted the GBP by over 1 cent against the USD.


- US housing starts surged to an annualised pace of 1091k in November (exp: 954k), up sharply from October's 889k. Permits were also better than expected at 1007k (exp: 990k). These show that the housing recovery is back on track after taking a bit of a breather earlier in the year.

- Germany: IFO survey of business sentiment rose as expected driven by a stronger than expected rise in the expectations series. Overall business sentiment has consistently improved since stumbling in Q1 2013, and is reflective of the strength in the German economy relative to the rest of the euro area.


NZD/USD will most likely take direction from the FOMC today. ANZ expects a small Fed taper or if not at least a strong indication that the taper is imminent, this should continue to keep NZD/USD topside capped. NZ Q3 GDP to be released 2¾ hours after the FOMC is forecast to be strong with the market consensus at 1.1% and ANZ at 1.3%. We believe strength is already priced into the NZD.

Expected range: 0.8080 - 0.8340


This cross is likely to be impacted by Q3 GDP today. It is notable that despite business confidence at 14 year highs NZD/AUD was quick to revert from 0.93 suggesting a good GDP may already be priced.

Expected range: 0.9180 - 0.9320

NZD/EUR: German confidence…

The German IFO confidence survey showed gains in the business climate and expectations components but the current December assessment declined unexpectedly.

Expected range: 0.5930 - 0.6040

NZD/JPY: A volatile day

Long NZD and short yen are popular positions and today there is the reasonable likelihood for a surprise. Positioning will play a key role in today’s moves.

Expected range: 84.00 - 85.60

NZD/GBP: Unemployment drops …

British unemployment dropped to 7.4% from 7.6%, taking it closer to the 7% threshold where the BOE will consider rate hikes. CBI reported sales boomed to 34 indicating a cheery Christmas in the UK. GBP has been a strong performer and we would expect that to continue.

Expected range: 0.4950 - 0.5060

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