Euro Remains Firm ahead of Draghi Testimony

July 14, 2014

ECB President Draghi will be testifying today before the EU Parliament in Strasbourg, France.  Excessive euro strength is a more pressing issue.

Federal Reserve Chair Janet Yellen testifies Tuesday on Monetary Policy and the State of the Economy before the Senate Banking Committee.  She will reprise that testimony Wednesday before the House Financial Services Committee.  This semi-annual appearance used to be known as the Humphrey-Hawkins testimony.

The Bank of Japan Board held its first day of meetings today and will announce its latest policy decisions tomorrow.  Bank of Japan Governor Kuroda and Bank of England Governor Mark Carney also speak publicly on Tuesday. 

On Friday, the Bank of Mexico left its target interest rate at 3.0% as was expected.

The dollar is unchanged so far today against the Canadian, New Zealand and Australian dollars as well as the Chinese yuan.  Many Chinese statistics will be reported later this week, including second-quarter GDP.  The dollar has slipped 0.1% against the Swiss franc and euro.  EUR/USD is tenaciously holding onto a 1.36 handle.  The U.S. currency has risen 0.2% vis-a-vis the yen and 0.1% relative to sterling.  Data released today have been rather light, but U.S. retail sales are due Tuesday along with the Empire State manufacturing index, import prices and weekly chain store sales.

Share prices in Europe began the new week on an up note after falling last week.  The German Dax is 0.7% higher, and the British Ftse and Swiss SMI have advanced by 0.5% and 1.1%.  The Paris Cac is up 0.5%, but equities in Spain and Italy have not participated in this rebound.  In the Pacific Rim, Japan’s Nikkei climbed 0.9%, and China’s market jumped by 1.1%.  Stock prices closed up 0.5% in New Zealand, Hong Kong and Australia and rose 0.3% in Taiwan and South Korea.

The ten-year German bund and Japanese JGB yields edged up a basis point, while the British gilt held steady.

Comex gold and WTI oil dropped 1.1% and 0.5% to $1,322.60 per ounce and $100.36 per barrel.

The rise in Japanese industrial production during May was revised to 0.7% from 0.5% reported initially.  Output had slumped 2.8% in April and was 2.8% lower in April-May on average than the 1Q mean level.  Production in May was also just 1.0% greater than a year earlier.  Industrial shipments fell for a fourth straight month and were 6.0% weaker on average in April-May than the first-quarter level.  Capacity ticked up 0.1% in May but recorded an on-year delcine of 1.7%, while capacity use fell 0.7% in the latest month.

Industrial production in the euro area dropped 1.1% in May, cutting the 12-month rate of increase to 0.5% from 1.4% in the year to April.  Output dropped at least 1.0% in Germany, France, Italy, and Portugal and by 0.9% in Spain.  Ezone production in April-May was 0.1% softer than the 1Q average level.

Ireland’s construction purchasing managers index printed at 59.9 in June, down 0.3 points but still very elevated.  Construction has been expanding, that is with PMI readings above 50, since last September.  A 16% widening of the Irish trade surplus to EUR 3.34 billion was also reported.

Singaporean real GDP dropped 0.8% last quarter, defying expectations of a significant increase.  On-year growth was cut more than in half to 2.1% from a downwardly revised 4.7% in the first quarter.

Indian wholesale price inflation slowed to 5.4% last month from 6.0% in May.

New Zealand’s Performance of Services index printed at a solid 54.7 in June, 0.6 points better than May’s reading but below April’s 58.5 score.  Home prices in New Zealand slid 0.3% in June.

News from the Middle East was gloomy over the weekend.  Tensions escalated between Hamas and Israel.  ISIS rebel troops moved closer to Baghdad in Iraq.  Ukraine-Russia relations took a turn for the worse.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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