Weaker Euro, Pound and Swiss Franc

May 13, 2010

The dollar has advanced 0.4% against sterling, 0.3% versus the Swissy, and 0.2% against the euro, but it has softened against commodity-sensitive currencies like the Aussie dollar (0.6%), kiwi (0.5%) and Canadian dollar (0.6%).  Concerns persist that the EU rescue package will not prove adequate and about the impact of coming austerity.  Britain’s new Conservative-led coalition government plans to implement Gbp 6 billion of spending cuts within two months.

Stocks rose 2.2% in Japan and Taiwan, 2.4% in China, 1.8% in Australia, 1.9% in South Korea, 1.2% in Indonesia, and 1.0% in Hong Kong.  The German Dax and British Ftse show gains of 0.6% and 0.3%, while the Paris Cac lags with no change.  Some markets, but no major ones, are closed for Ascension Day.

Ten-year German bund and British gilt yields are 2-4 basis points lower, while the JGB is one basis point firmer.

Oil and gold prices retreated 1.0% and 0.8% to $74.86 per barrel and $1233.30 per ounce.

Japanese money and credit growth remained weak in April.  M3 and bank loans posted on-year changes of 2.2% and minus 1.8%.  Their changes in 1Q10 were 2.1% and minus 1.6%, respectively.  Japan’s current account surplus widened sharply to Y 2.534 trillion in March from Y 1.471 in February and Y 1.535 trillion a year earlier.  On-year growth in exports and imports was 45.4% and 22.0%.  The seasonally adjusted current account surplus of Y 1.773 trillion in March was 66% greater than February’s surplus.  Stock and bond transactions last month generated a net Y 1.695 trillion inflow.  Customs exports in the first twenty days of April were 41.4% higher than a year earlier.

The Japanese economy watchers index advanced for a fifth straight time to 49.8 — near to the break-even point — from 47.4 in March, 42.1 in February, 38.8 in January, 35.4 in December and 33.9 in November.  April’s level was the best since March 2007.  Japanese machine tool orders were 220.5% greater in April than a year before, down from an on-year leap of 262.2% in March.

Britain’s Department of Communities and Local Government house price index accelerated to an on-year increase of 9.7% in March from 7.3% in February, 6.2% in January, 2.9% in December and just 0.5% last November.  The U.K. goods and services trade deficit widened 68% to Gbp 3.68 billion in March from Gbp 2.19 billion in February and by 11.6% to Gbp 9.67 billion in 1Q10 from Gbp 8.66 billion in 4Q09.  The merchandise trade gap reached Gbp 7.52 billion in March and Gbp 21.0 billion in 1Q.  Exports and imports were 11.7% and 9.4% greater in the first quarter than a year earlier.

British consumer sentiment, according to the Nationwide index, hardly rebounded in April from a sharp tumble in March.  Such printed at 74 after 72.

Greek unemployment rose in February to 12.1%, highest since May 2004, from 11.3% in January and 9.1% a year earlier.  Irish consumer prices firmed 0.2% last month.

Australian unemployment in March was revised up a tenth to 5.4% and stayed at that level last month.  Jobs rose by 33.7K in April after an upwardly revised gain of 23K in March.  Employment has climbed for eight straight months.

New Zealand’s business purchasing managers index rose sharply to 58.9, best since June 2004, from 56.3 in March, 53.6 in February, and 52.0 in January.  This better-than-anticipated result boosts chances for a rate hike next month in New Zealand.  However, the economy’s food price index, which slid 0.5% last month and now lies 3.1% below mid-2009 highs, provided some contrary evidence.

GDP growth in Malaysia accelerated to an on-year pace of 10.1% in the first quarter.  Bank Negara Malaysia is expected to boost its benchmark interest rate today.  Central bank meetings are also happening in Chile and South Africa today, where no policy changes are anticipated.

Consumer confidence in Thailand sagged in April to 67.2 from 69.8, depressed by political unrest.

The ECB Bulletin was published, rehashing what Trichet said at the May 6 press conference, namely that growth and inflation will stay subdued and policy does not need to be tightened.  A published survey of expected growth showed downward revisions for both this year and next.

Scheduled U.S. data include import prices and weekly jobless insurance claims.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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