Waiting for a Slew of U.S. Data

January 16, 2015

U.S. economic statistics will be released today on consumer prices, industrial production, consumer confidence, and capital flows with other economies.  We arrive at this juncture after five straight daily declines in U.S. share prices and one of the most volatile currency market days ever.  In forty years of forex market watching, I can not recall a major dollar relationship with a wider daily high-low range that the 37.7% spread of USD/CHF yesterday (1.0220 to 0.7424).  Nothing this extreme happened right after the Plaza Accord of September 1985 or when the Fed adopted money stock targeting in October 1979 or in November 1978 when the U.S. launched a multi-pronged effort to rescue the U.S. currency from freefall.

The key EUR/CHF cross-rate touched a franc high of 0.9711 overnight but is presently above 1.01 and 1.6% weaker than the Thursday close in NY.  EUR/JPY is steady at 135.29 after touching a yen high of 134.70 earlier today.  The yen also briefly strengthened past 116/USD to reach 115.85.

The U.S. dollar has recovered 1.9% against the Swiss franc and shows other gains of 0.5% relative to the yen, 0.4% versus the kiwi and euro, 0.3% relative to the loonie and yuan, and 0.1% against the Australian dollar.  The dollar has dipped 0.1% against sterling.

Stocks in the Pacific Rim fell 1.4% in Japan and South Korea, 1.1% in Singapore, 1.0% in Hong Kong, 0.8% in Indonesia, 0.6% in Australia, 0.5% in New Zealand and 0.3% in Taiwan but rose by 0.9% in China and 0.2% in India.  Trading in Europe has been mixed, with Swiss equities tumbling 3.9% and the Paris Cac off 0.5%, while stocks rose 1.0% in Italy, 0.2% in Spain, and 0.1% in Germany.  The British Ftse is steady.  In light of the franc’s huge rise since Wednesday and the deep decline in the Swiss stock exchange, the decision to cut the currency loose appears to reflect an element of policy miscalculation, not unlike the Lehman Brothers fiasco in September 2008.

Ten-year sovereign debt yields fell overnight by three, two and one basis points in Switzerland, Britain, and Germany.  The Japanese JGB 10-year yield also dipped a basis point, hitting a new record low of 0.23%.  Over the past month, 10-year yields have fallen by 34 bps in the United States, 31 bps in Britain, 17 bps in Switzerland, 14 bps in Germany and 12 bps in Japan.

West Texas Intermediate oil rebounded 2.1% to $47.23 per barrel overnight.  Comex gold settled back 0.6% to $1,257.60 per troy ounce.

Analysts were surprised by a 25-basis point cut of the Central Reserve Bank of Peru’s reference interest rate to 3.25%.  Recent Peruvian economic indicators have undershot expectations.  Monetary officials in Chile, in contrast, retained a 3.0% interest rate benchmark and gave not signal of strong bias regarding its next move.

Japan’s tertiary index, a monthly gauge of service sector activity, rose by an expected 0.2% on month in November but posted a 1.7% drop from a year earlier.  The tertiary index remains 3.9% below its March 2014 level.  That was the last month before a 3 percentage point sales tax hike.

Japanese stock and bond transactions generated a net JPY 1.379 trillion capital outflow in the first full calendar week of 2015.  That was 5.5 times larger than the outflow of the prior week.

Revised Euroland CPI figures for December show a monthly dip of 0.1% as energy plunged 3.3%.  A 0.2% on-year decline in consumer prices followed a 0.3% 12-month rate of increase in November.  Energy prices fell 6.3% on year, while all other consumer prices rose 0.6%.  Core inflation was revised down a tick to 0.7% from 0.8% reported in the preliminary release.  There was a 1.0 percentage point swing in CPI inflation from +0.8% in December 2013 to -0.2% last month.

Germany also released December CPI, showing no change on moth and a 0.2% 12-month rate of rise (lowest since October 2009).  German inflation averaged 0.9% last year, down from 1.5% in 2013, 2.0% in 2012 and 2.1% in 2011.  Czech producer prices dropped 3.7% in the year to December, 2 percentage points more than posted in the year to November.  Austrian consumer prices stagnated in December and fell in on-year terms to 1.0% from 1.7% in the year to November.  Polish consumer prices decreased 0.3% on month and 1.0% on year in December.

Car registrations in the 25-nation European Union, a gauge of sales,  increased 5.7% in 2007, the first calendar year rise since 2007.  Sales in December were 4.7% higher than a year before.

Swiss retail sales volume edged up 0.2% in November but was 1.2% lower than a year earlier.  Dutch retail sales were unchanged over the same 12-month span.

Spain’s index of leading economic indicators showed an accelerated 0.6% advance in November, according to the Conference Board, while the index of coincident economic indicators edged only 0.1% higher. 

Italy’s current account surplus narrowed 36% on month to EUR 3.5 billion in November.  Singapore’s trade surplus fell 32% on month to SGD 4.5 billion in December.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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