Posts tagged ‘westpac’

February 15, 2012

GBP/AUD is weak but risk-off in Q2 may pullback

By Westpac

Although historically trades below 1.54 are rare, Westpac analysts see fundamentals pushing to even lower levels: “GBP/AUD is very weak by historical standards, with trade below 1.67 only occurring on 10.3% of all trading days since the AUD float in 1983 and closes below 1.54 for just 4.4% of trade”, says Sean Callow, analyst at Westpac. “But fundamentals do argue for levels well below long term averages, especially given Australia’s terms of trade (ratio of export to import prices) is only modestly below the highest levels in over a century”, he adds.

Further BoE dovishness, while the RBA maintained its interest rate at 4.25%. To be noted that Westpac analysts expect the RBA to cut its rate in March.

In conclusion, the GBP/AUD might break below 1.45 soon, but if the risk sentiment degrades in Q2, a pullback to 1.4950-1.5150 is likely, with possible unsustained rallies to 1.5400.

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February 15, 2012

GBP/AUD could break below 1.45 in the month ahead

By Westpac

Sean Callow, analyst at Westpac Global Markets Strategy Group, just released a note to clients making the case for a potential downtrend continuation on GBP/AUD, noting “it could well break below 1.45 in the month ahead” but warns that “a poorer risk environment into Q2 should push the pair back to 1.4950-1.5150.” He concludes saying: “Probes as high as 1.54 are quite possible but probably won’t be sustained.”

Looking at historical standards, Sean explains: “GBP/AUD is very weak with trade below 1.67 only occurring on 10.3% of all trading days since the AUD float in 1983, with closes below 1.54 for just 4.4% of trade. But fundamentals do argue for levels well below long term averages, especially given Australia‟s terms of trade is only modestly below the highest levels in over a century.”

The analyst expands on the bearish scenario: “Global financial conditions can turn quickly however, and Westpac retains a baseline call for a March cash rate cut. In the UK, headline inflation is expected to fall steeply and we don‟t
expect much improvement in growth (zero average growth in 2012) after the Q4 11 -0.2% q/q contraction. The
BoE may not raise its bank rate any sooner than the Fed lifts its funds rate.”

February 2, 2012

NZD/USD potential decline to 0.7300 next months – Westpac

The kiwi spiked at 0.8357 posting a 5-months high after the European close in yesterday’s session, propelled by the news-risk rally sparked just before the opening bell in London. The NZD also found some extra fuel for the upside in the strong US manufacturing ISM print.

Many analysts have showed their concern about the stubbornness of the kiwi at these levels, but I.Speizer, expert at Westpac, sustain that the increased foreign appetite for New Zealand bonds since July is the main reason behind this (not so) surprising strength in the kiwi. These inflows have accelerated due to the relentless deterioration of the euro zone economic conditions and the last US debate regarding the debt ceiling.

Going further into his analysis, he warns about taking long positions in the cross at these levels, citing waning momentum in the commodity-currency indicated by Elliot waves and RSI readings. “A reversal is looming and should take the NZD to at least 0.7370 (low Nov.25) during the next few months”, he stressed.