Stronger Australian Dollar

August 4, 2015

The U.S. currency fell 1.8% against the Australian dollar but just 0.5% versus the kiwi and yen, 0.3% relative to the euro and 0.1% vis-a-vis sterling.  The dollar is up 0.4% against the loonie and 0.1% relative to the Swiss franc, and it is holding steady versus the yuan.

The Shanghai Composite stock index rose 3.7%, but share prices are down 1.7% in Greece, 1.2% in Spain and 1.0% in Italy.  Stocks firmed 1.0% in South Korea and slid 0.1% in Japan.  Equities are unchanged in the U.S. and Germany and up 0.3% in Great Britain.

The 10-year Treasury yield climbed back three basis points as Fed tightening expectations are rising anew. U.S. factory orders rose 1.8% in June but fell 5.9% on year in the first half of 2015.  The U.S. IBD/TIPP Optimism index sank 1.2 points in August to 46.9, the lowest reading so far in 2015.  However, the New York regional manufacturing PMI, known as the NAPM index, jumped 5.7 points in July to a 7-month high of 68.8.  Redbook reported a 0.2% weekly rise in chain store sales last week, which kicked up the on-year comparison to 1.7%.  U.S. motor vehicle sales totaling an annualized 17.6 million last month surpassed the expected total and June’s total.

Among other sovereign debt 10-year yields, the British gilt firmed two basis points, but the Japanese JGB and German bund are down 2 and 1 basis points,

West Texas Intermediate oil rebounded 1.6% to $45.90 per barrel.  Comex gold is 0.5% higher at $1,092.00 per troy ounce.

The Reserve Bank of Australia made the biggest news over the overnight session, not with its interest rate decision to, as expected, keep the Official Cash Rate unchanged at a record low of 2.0%, but with tempered language about the Aussie dollar that no longer demanded necessary additional depreciation.  Rather, it just observed that the currency has fallen in response to much lower commodity prices.  The OCR was at 2.5% at end-2014 but cut by 25 basis points in both February and May.

Australian retail sales growth accelerated to 0.7% on month in June from 0.4% in May and no change in April.  Retail sales volume went up 0.8% in the second quarter.  The Aussie goods and services trade deficit widened 9.6% on month to A$ 2.933 billion in June and by 3.9% in fiscal 2014/15 to A$ 29.3 billion.

The Reserve Bank of India also left its repo unchanged.  Such is at 7.25% and was cut by 25 basis points each this year in January, March and June.

Producer prices in the eurozone dipped 0.1% in June and recorded a 12-month 2.2% decline.  Non-energy components of the PPI were flat on month and 0.4% lower than in June 2014.

Growth in Japan’s monetary base slowed to 32.8% in July, lowest in over a year, from 34.2% in June, 36.0% in the second quarter and 43.2% in 2014.

Japanese labor cash earnings, which need to rise to make the goal of Abenomics viable, instead posted a 2.9% on-year drop in June.

Among more released purchasing manager survey reports for July,

  • The non-oil PMIs of 1) Egypt fell 1.0 points to a 5-month low of 49.2, 2) Saudi Arabia rose 1.6 points to a 3-month high of 57.7, 3) and the U.A.E. firmed 1.1 points to a 2-month high of 55.8 after setting a 22-month low in June.
  • Ireland’s manufacturing PMI rebounded 2.1 points to a 2-month high of 56.7, indicating the quickest rate of growth among reporting eurozone members.
  • Canada’s manufacturing PMI slipped half a point to a 2-month low of 50.8.
  • Britain’s construction PMI dropped back a full point to 57.1 under June’s four-month high.
  • Singapore’s manufacturing PMI fell below the 50 no-change level for the first time since April to 49.7.
  • Mexico’s manufacturing PMI rose 0.9 points to a 2-month high of 52.9.
  • And Norway’s manufacturing PMI remained under 50 for a fifth consecutive time, this time printing at 45.8.

South Korea consumer price inflation stayed at a low 0.7% in July, but core inflation accelerated to 2.5%.

The British Nationwide house price index increased 0.4% on month in July, most since April.  The 12-month increase rose 0.2 percentage points to 3.5% after sinking to a 2-year low in June.

Romanian producer prices were 1.9% lower than a year earlier in June, but retail sales growth accelerated to a brisk 7.1%.  Romania’s central bank holds a policy meeting today.

Brazilian industrial production, down 3.2% in the year to June, fell less than forecast by analysts.

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

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