Narrowly Mixed Dollar Ahead of FOMC Decision

September 17, 2015

There’s been an 8.3 earthquake off the coast of Chile and an ensuing tsunami. 

In last night’s Republican debate, Trump’s rivals escalated their attacks on the front-runner.

This FOMC day could produce the first federal funds rate hike since a 25-basis point increase in June 2006, so there’s excitement in the air.  A Janet Yellen press conference is scheduled afterward, and new forecasts will be announced.

The dollar has slipped 0.3% against the euro and Swissie and 0.2% versus sterling.  The dollar rose overnight by 0.3% against the yen, kiwi and Aussie dollar.  It’s unchanged relative to the loonie and yuan.

Chinese share prices took another big tumble of 2.1%.  But stocks rose 1.4% in Japan, 1.0% in India, 1.1% in Indonesia, 0.9% in Singapore and Australia and 1.4% in Taiwan.  The Spanish IBEX gained 1.3%.  The German Dax and Paris Cac are 0.4% and 0.3% higher, but equities in the U.K. are down 0.3%, and Swiss and Italian shares have edged 0.1% lower.

The price of West Texas Intermediate oil dropped 1.4% to $46.48 per barrel.  Comex gold edged down 0.2% to $1,117.00 per ounce.

Ten-year sovereign debt yields increased by 2 basis points in the U.K. and a single basis point in Germany but dipped a basis point in Japan.

Besides the focus on the Federal Reserve interest rate decision, several U.S. economic data reports are scheduled: housing starts, building permits, the Philly Fed manufacturing index, the quarterly current account and weekly jobless insurance claims.

Japan’s August customs trade figures revealed a somewhat larger-than-forecast deficit of JPY 570 billion (JPY 359 billion seasonally adjusted), a 4.2% on-year drop in export volume, a 29.9% dive in mineral fuel imports, and a 10.3% increase in all other imports from a year earlier.  Exports and imports each fell on month in seasonally adjusted terms.  On the whole, the report is discouraging, but Bank of Japan Governor in a speech today continued to send an optimistic message.

Bank Indonesia left the BI interest rate benchmark unchanged as expected at 7.5%, its level since a 25-bp cut last February.

The Swiss National Bank’s quarterly policy review resulted in an unchanged interest rate target, a reaffirmed pledge to intervene as officials see fit but with no ironclad franc target in mind, and a lower projected inflation path in the near term.  The 3-month LIBOR target range is -1.25/-0.25%, with a point objective of -0.75% on sight deposits.  Despite some recent depreciation, the franc is still considered way overvalued.

The Swiss government now projects GDP growth of 0.9% in 2015 and 1.5% in 2016.

New Zealand real GDP advanced by a slower-than-expected 0.4% last quarter.  On-year growth slipped to 2.4%.  Net exports exerted a 1.1 percentage point drag.  Growth in personal consumption and business investment was decent, in contrast.

Treasury-compiled data on U.S. capital movements showed a huge contraction in the net long-term inflow to just $7.7 billion in July from $103.1 billion in June but a greatly improved total capital inflow of $141.9 billion.

Japanese stock and bond transactions generated a net JPY 1.538 trillion capital outflow last week, down from JPY 3.313 trillion the week before.  End-September marks the end of the first half of Japan’s fiscal year.

British retail sales volume edged up just 0.2% last month following no change in July.  In the three months to August, such firmed 0.4% against the prior three months and 4.0% on year.  Excluding motor fuel, sales volume edged 0.1% higher in August but showed a diminished 3.5% advance from a year earlier.

Construction output in the eurozone rebounded 1.0% in July from a 1.2% June decline.  There was a 1.8% increase from July 2014 versus a 0.7% drop between 2Q14 and 2Q15.

Wholesale turnover in South Africa rose 2.5% in July.  Hong Kong unemployment was at 3.5% last month.  The Dutch jobless rate was 6.8%.  And Portuguese producer prices posted a 3.2% on-year decline in August, the biggest such drop since February.

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

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