News and views
The USD was again stronger in NY helped in large part by the continued rise in yields. 10yr yields rose to 3.76% as the market began to prepare for supply next week. US data didn’t give a clear picture for bond traders with GDP revised lower while existing home sales surged. It looks like the move is more technically driven. Gold continued its recent slide though is down by ‘only’ about US$4 while oil is up at 74.40. The CRB is up on the day and equities in the US again gained ground with most indices up in the region of 0.5%.
Currencies did have an attempt at recovery in London with EUR firming to a high of 1.4332. However, this strength was all but given back in NY and EUR slipped to a low of 1.4220.
AUD hit a London high of 0.8834 but then made a fresh low in NY at 0.8751.
NZD broke key technical support at 0.7030 and traded sub 0.7005 although we have since recovered slightly and open the new trading day round the 0.7030 level.
US GDP growth revised down from 2.8% annualised to 2.2% in Q3, due to lower estimates for personal spending, non-residential investment, government spending and inventories. Recall that the advance estimate back in October was 3.5% so this represents quite a big downward revision over the past two months. Note that Westpac’s forecast for Q3 GDP ahead of the advance report two months ago was 2.3%, when the consensus was 3.2%, so once again (as with the revised payrolls data a few weeks back), Westpac’s forecasts turn out to be better guides to the US data than the early estimates published by the US statisticians!
US existing home sales surged 7.4% in Nov, to be up 28% over the past three months, and 46% higher than their low point in Jan this year. The housing data “wobble” that has seen weaker starts, homebuilder sentiment, new sales and prices on some measures in recent months is yet to show up in this indicator of the housing market. The same report from the National Association of Realtors showed house prices down 4.3% yr; a separate report from the FHFA (Federal govt) showed house prices up 0.6% in Oct, the first monthly gain in three months.
US Richmond Fed factory index falls to –4 in Dec. This is the first negative reading for this index since April 2009. Richmond was the first factory index to turn positive back in May, so this could be a sign of weaker industrial news to come heading into the New Year.
German consumer confidence slips from 3.6 to 3.3 in “January”, according to GfK, who actually conducted the survey in early December. This result ties in with weaker Belgian and UK confidence surveys taken this month.
UK GDP contraction revised from –0.3% to –0.2% in final Q3 report. There were stronger estimates for construction and business investment, offsetting steeper falls in industrial production and services.
Outlook
AUD/USD and NZD/USD outlook today: Higher US yields remains the dominant theme and this continues to weigh on both AUD and NZD. Selling strength in AUD remains the preferred trade with the market unable to push above the 0.8850/0.8900 level. NZD sits precariously at the key 0.7030 level. The market may attempt to hold this level, but a move lower seems inevitable over the liquidity thinned holiday period.
