Strengthening Euro

August 21, 2012

The euro climbed 0.9% against the dollar and touched a six-week peak against the yen of 99.075 overnight.  By policy design, the Swiss franc also advanced 0.9% against the greenback, moving in tandem with the euro.  The U.S. currency has also lost 0.6% versus the New Zealand dollar, 0.5% relative to the Aussie dollar, 0.4% vis-a-vis sterling, and 0.3% against the loonie.  The yuan is unchanged, and the yen has edged down 0.1% against the dollar.

The Daily Telegraph reported conditional German acceptance of large ECB buying of Italian and Spanish bonds.  The conditions would be along the lines outlined last month by ECB Pdt Draghi.  Moody’s said the ECB debt crisis is perhaps only half over. 

Spain’s auctions of 12- and 18-month government bills were slightly higher than planned and fetched lower interest rates and better bid-cover ratios than the prior auctions.  Italian 10-year sovereign debt yields are lower at 5.67%, and their Spanish counterpart is at 6.19%.  While well below prior highs, these levels are still unsustainably high if the crisis is to be resolved.  Several important bilateral meetings are scheduled among Euroland leaders this week.

10-year German bund and British gilt yields are up by four and two basis points.  The 10-year JGB is a basis point softer.  U.S. Treasury futures point to a higher yield.

Share prices rose 1.1% in India, 1.0% in Taiwan, 0.7% in New Zealand, 0.5% in Indonesia and China, and  0.4% in Australia but fell by 0.2% in Japan and South Korea.  In Europe, the Spanish IBEX slid 0.2%, but the Paris Cac and German Dax are up 0.7% and 0.6%.  The British Ftse is 0.4% higher.

Gold and oil prices show solid gains of 1.0% and 1.3% to $1639.20 per ounce and $97.20 per barrel.

Japan’s all-industry index fell 0.2% in June, matching the dip in May.  This supply-side monthly estimate of GDP slid 0.1% last quarter but was 2.6% greater than in 2Q11.  In June, industrial production firmed 0.4%.  The tertiary index edged 0.1% higher, but public spending and construction dropped by 0.2% and 0.1%.

Japanese department store sales in July were 3.3% weaker than a year earlier.  Such had been down 1.2% on year in June.

The People’s Bank of China ramped up its reverse repo operations to inject more liquidity into the marketplace.

Minutes from the Reserve Bank of Australia’s meeting earlier this month claimed “it will take time for the impact of rate cuts to become apparent” and perceived growth to be proceeding more or less in line with trend in Australia despite struggles elsewhere in the world.  Officials seem very comfortable with the amount of easing done earlier and in no hurry to do more.

Indian consumer prices rose 9.9% in the year to July.

Singapore wholesale turnover advanced 2.3% sequentially in the second quarter but was 0.7% lower than a year earlier.  CPI inflation in Hong Kong subsided to 1.6% on year in July from 3.7% in June and 4.3% in May.  South Africa’s index of leading economic indicators posted a fourth consecutive decline, dropping 1.1% in June. 

Germany’s index of leading economic indicators fell 0.8% in June, marking the third decline in a row.  The coincident index dipped by 0.1%.

British monthly public finances were worse than projected in July.  Usually, there is a surplus in that month, but instead there was a GBP 0.6 billion deficit.  The debt/GDP ratio of 65.7% compared to 61.8% in July 2011.

The CBI released its August survey of British industrial trends, showing a worse reading of negative 21 after minus 6 in July and minus 11 in June.  Such was the weakest score since December 2011.

Core Polish CPI inflation remained steady at 2.3% in July.  The central bank has a policy meeting today.  No change in the key interest rate seems likely.

Swiss M3 grew 9.8% on year in July, accelerating from a 12-month increase of 8.5% in June.

No major U.S. releases are planned today. 

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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