Continuing Euro Support above $1.1300

February 12, 2015

The euro rose 0.2% against the dollar.  Despite persistent concerns about Grexit — Greece abandoning the common European currency or being thrown out by other members — the euro, now at $1.1342, repeatedly finds support whenever it dips under $1.13.  Greek debt talks have made very little progress.  They will resume next Monday, with creditors and the Greek government still far apart.  The euro has lost further ground against several other currencies.

The dollar otherwise has lost 0.7% against sterling, 0.6% versus the loonie, 0.5% relative to the yen, and 0.4% vis-a-vis the kiwi.  Poor Australian labor statistics depress the Australiand dollar by 0.5% against the dollar, and the Swissie has lost 0.4%.  The yuan is down 0.1%; the People’s Bank of China has been heavily dumping liquidity into China’s money market ahead of next week’s Lunar New Year.

Australia’s jobless rate leaped 0.3 percentage points to 6.4% in January, highest since August 2002.  Jobs, down 12.2K overall and 28.1K for full-time workers, fell more than twice expectations.

A 1.9% higher close in Japan’s Nikkei foreshadowed strong bidding in several European markets, where share prices so far have risen 5.7% in Greece, 2.2% in Italy, 1.8% in Spain, 1.5% in Germany and 0.9% in France.  British and Swiss markets are lagging.

10-year sovereign debt yields climbed five basis points in the U.K. and 4 bps in Greece.  German bunds are unchanged, and the 10-year Japanese JGB edged a basis point higher.

West Texas Intermediate oil rose 3.2% to $50.42 per barrel.  Comex gold is 0.3% firmer at $1,223.30 per troy ounce.

There were two Japanese data surprises.

  • Officials in January had warned that machinery orders seem to be stalling, but reversed that call after reporting an 8.3% advance in December core orders.  Such was three times greater than street expectations and enough to produce a 0.4% 4Q-over-3Q rise.  Core machinery orders had plunged 10.4% in the second quarter of 2014 but rebounded 5.6% in 3Q.  If surveys suggesting a 1.5% rise in the first quarter of 2015 prove accurate, Japan would have three straight quarterly rises, enough to justify the latest orders assessed trend of a “modest pickup.”  Machine tool orders meanwhile registered 8.6% on-year growth in December, and core machinery orders were 11.4% greater than at end-2013.
  • Domestic corporate goods prices plunged 1.3% on month in January, cutting the 12-month rise to just 0.3% from 1.8% in December and as much as 5.9% last August.  Import prices dived 4.7% on month and 14.6% on year, while export prices declined 1.1% from December and by 4.2% from a year before.

New Zealand’s business purchasing managers index dropped 6.3 points to around a 2-year low of 50.9 in January.  Expected Australian CPI inflation accelerated to 4.0% this month.

Industrial production in the eurozone proved weaker-than-forecast in December, posting no change from November and an on-year dip of 0.2%.  Output grew in the three largest ezone economies (1.6% in France, 0.5% in Germany and 0.4% in Italy) but tumbled 12.4% in Ireland, 3.6% in Portugal and 1.4% in Greece.  Non-durable consumer goods fell 1.8% on month.  Overall production rose 0.9% annualized between 3Q and 4Q on average, suggesting positive GDP.

Revised data showed German consumer prices falling 0.4% in the year to January versus a preliminary -0.3% estimate and rises of 0.2% in December and 0.8% for four straight on-year readings from July through October.  The Harmonized German CPI fell 1.3% on month and 0.5% on year, thanks to a plunge of 9.0% on year in energy along with a collective 0.8% rise in all other CPI items.

Three central banks made interest rate pronouncements, and the Bank of England published its quarterly Inflation Report.

  • The Swedish Riksbank became the latest monetary authority to adopt a negative interest rate, cutting its repo rate to minus 0.10% from zero and suggesting that no tightening is likely before the second half of next year.
  • The National Bank of Serbia policy interest rate was left unchanged at 8.0% despite currently sub-target inflation.
  • The Policy Board of Bangko Sentral ng Pilipinas retained a 4% overnight borrowing rate and a 6% overnight lending rate, levels that have prevailed since a 25-basis point hike last September. 
  • The Bank of England isn’t ruling out negative inflation for some months in the first half of 2015 but anticipates a return to its 2.0% target by the end of the forecast time horizon.  A growth boost is expected from lower oil prices, and rather robust GDP expansion of 2.9% this year and next followed by 2.7% in 2017 is projected.  If inflation runs lower than expected and persists longer than assumed, officials are prepared to ease further.

Greek unemployment of 25.8% in November, same as the month before, is the lowest otherwise since the third quarter of 2012.  Swedish joblessness of 8.4% not adjusted in January was the highest since last July.  The rate in seasonally adjusted terms was 7.8%, unchanged from the month before.

Malaysian real GDP growth accelerated to 5.8% on year last quarter, up 0.2 percentage points. 

Indian industrial production rose only 1.7% between December 2013 and December 2014.  In the same 12-month period, output went up 3.2% in Romania and 4.6% in Hungary. 

Dutch consumer prices were unchanged from a year earlier in January, and Finnish retail sales dropped 1.6% in the year to December.

Just in: U.S. retail sales and weekly jobless insurance claims were each disappointing.  Sales fell 0.8% overall in January and by 0.9% excluding motor vehicles and parts.  This decline was similar to revised December losses and surpassed street expectations by a factor of two.  new claims increased by 25K to 304K last week.

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

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