Rising Dollar

March 10, 2015

Dollar appreciation continued relentlessly overnight.  EUR/USD touched a new low for the move of $1.0735 on concerns that Greece may not comply with conditions, without which liquidity aid from the ECB would be stopped.  The immediate focus is upon whether eurozone examiners would be allowed back in Athens tomorrow to see Greece’s financial books.

Chinese CPI inflation rebounded more sharply in February than forecast, posting a 1.4% on-year advance after 0.8% in January, which had been a 5-year low.  However, producer prices posted a larger 4.8% 12-month drop versus a slide of 4.3% in the year to January.  PPI inflation has been negative for the past 3 years.

The National Australian Bank reported a zero reading on its February business confidence index, lowest since June 2013.  The business conditions index stayed at +2, the same result as in December and January.

A 0.7% on-month decline in Italian industrial production during January was the first drop since September and depressed the calendar-adjusted on-year slide to 2.2%.  Analysts were anticipating a small increase. 

French industrial output rose only 0.4% in January, down from December’s gain of 1.4%, but the 12-month change swung to a 0.6% advance from a 0.4% drop in th year to December.

The dollar appreciated 1.2% against the kiwi, 0.9% versus the euro and Australian dollar, 0.8% vis-a-vis the Swiss franc and 0.4% relative to the loonie, yen and sterling.  The yuan was steady overnight.

Share price movements  today also reflect a risk-off environment.  Stocks declined 0.7% in Japan, 0.9% in Hong Kong, 0.5% in China and India, 0.4% in South Korea, 0.3% in Taiwan and 0.2% in New Zealand and Singapore.  Spain’s IBEX is off 1.0%.  The British Ftse, Paris Cac and German Dax have respectively lost 0.7%, 0.6%, and 0.5%.  Italian equities also declined by 0.5%.

The 10-year Japanese JGB yield, which was as low as 0.19% on January 19, recouped another six basis points to 0.44%.  The British 10-year gilt, in contrast, fell by 3 bps, and German bunds held unchanged.

West Texas Intermediate oil prices fell by 0.8% to $49.61 per barrel.  Comex gold declined 0.6% to $1,159.70 per troy ounce.

British same-store sales posted a significantly smaller-than-forecast 0.2% on-year rise for a second straight month in February after having fallen 0.4% between December 2013 and end-2014.

Seasonally adjusted Swiss unemployment ticked up 0.1 percentage point to 3.2% in February, while the unadjusted index stayed at 3.5%.

Spanish retail sales posted their first on-month decline since October, a 0.4% drop in January that left the 12-month rate of rise at 4.1%.

Finnish industrial production declined 2.3% in January and recorded the biggest on-year drop, 3.9%, since the start of 2013. 

Icelandic GDP rose 0.2% on quarter and 3.0% on year in the final quarter of 2014, well below street forecasts.

Among other released consumer price reports, the Greek CPI posted a 2.2% on-year decline in February (1.9% harmonized) after 2.8% in January.  Romanian inflation swung to +0.4% in February from -0.7%.  Norwegian consumer prices were 1.9% higher than a year earlier in February, but the PPI in that economy posted a 9.9% decline.  On-year Danish CPI inflation amounted to just 0.2%, and Hungary recorded negative inflation for a sixth straight time, amounting to 1.0% last month.

Japanese money growth hasn’t accelerated in spite of the reinforcement of the Bank of Japan’s quantitative easing program a few months ago.  M2 rose 3.5% in February, matching the on-year increase in the fourth quarter of 2014 and the average pace over calendar years 2013-2014.  Broad liquidity growth was also 3.5% last month versus 3.4% in 4Q14 and calendar 2014.

Japanese machine tool orders increased 28.9% on year in February, up from 20.4% in January but below December’s 12-month pace of 33.9%.

Scheduled U.S. data today are the Labor Department’s JOLTS index of job hirings and separations, the NFIB small business sentiment index, and weekly chain store sales.

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

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