Sterling’s the Biggest Loser Against a Strengthening Dollar

February 22, 2016

Sterling fell 2.0% against the U.S. currency, which also has risen 0.9% against the euro, 0.8% relative to the Swiss franc and 0.5% vis-a-vis the yen. 

Emerging market currencies and commodity-sensitive monies have also performed well this Monday.  The U.S. dollar lost 1.1% against the Aussie dollar, 0.4% versus the kiwi, 0.5% against the rand and 0.2% against the loonie.  The ruble has risen over 1.0%.

West Texas Intermediate crude oil jumped 3.5% to $30.68 per barrel, while gold sank 2.0% to $1,202.90 per troy ounce.

Mayor Johnson of London revealed that he favors the U.K. leaving the European Union.  This creates a nasty split with Prime Minister Cameron, who won some concessions with other EU governments in an effort to keep the country in the EU.  Voters will decide the question in a referendum scheduled for June 23.

The Conference of British Industries’ monthly industrial trends index printed at -17 in February, two points less than the January reading, a four-month low, and the second weakest score in over a year.

The better tone in share prices last week has been extended.  Optimism got a boost from the sacking of China’s securities regulations czar.  The Shanghai Composite stock index rose 2.4%.  Share prices also closed up 1.0% in Australia and 0.9% in both Hong Kong and Japan.  In Europe, equities have so far climbed 2.9% in Italy, 2.1% in Spain, 2.0% in Germany, 1.7% in Greece, 1.6% in France, 1.4% in Switzerland and even 1.2% in Great Britain.

The ten-year British gilt yield rose three basis points, while its Japanese and German counterparts remained unchanged at -0.1% and 0.20%, respectively.

Preliminary purchasing manager survey results for February were reported for Japan and the eurozone.

  • Japan’s manufacturing PMI dropped 2.1 points to an 8-month low of 50.2, connoting stagnation.  Export orders growth weakened to a 3-year low.
  • Euroland’s composite PMI fell 0.9 points to a 13-month low of 52.7, suggesting that GDP growth probably slowed to about 0.25% this quarter.  The weakening growth trend has been accompanied by intensifying deflationary pressure.  The manufacturing gauge slumped to a 12-month low, while services fell to a 13-month low.
  • Germany has developed a two-speed economy.  The composite German PMI fell to a 7-month low of 53.8 according to the preliminary estimate.  While services grew marginally faster than in January with a robust reading of 55.1, manufacturing dropped 2.1 points to a 15-month low of 50.2, signaling near stagnation.  Manufacturing orders hit a 7-month low, reflecting the global slowdown.
  • The French Composite PMI dipped under the 50 no change line (scoring 49.8) for the first time since January 2015.  There was little strength in either services (a two-month low of 49.8) or manufacturing (2-month high of 50.3).  A silver lining was a 6-month high in business expectations.

China’s MNI business indicator weakened 2.4 points to a reading of 49.9 in February from 52.3 in January and 52.7 at end-2015.

Final Italian consumer price data confirmed the flash indication.  The CPI fell 0.2% in January but was 0.3% higher than a year earlier.  Core inflation accelerated to 0.8% from 0.6% in December.

The Swiss PPI/import price index dropped 0.4% in January, same as December’s monthly decrease, and was 5.3% below a year ago.  Import prices sank another 0.8% on month.  Domestic producer prices were 3.7% lower than a year before. 

Irish PPI inflation slowed sharply to a 14-month low of 1.3% in January.  The November-over-November increase had been 4.4%.

Japanese supermarket sales were 2.3% greater last month than in January 2015.

The Chicago Fed National Activity Index is due shortly.  The U.S. preliminary factory PMI survey compiled by Markit Economics also gets revealed this morning.  There’s a Bank of Israel policy meeting today.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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