Dollar Slightly Softer Ahead of U.S. Jobs and Trade Data

August 5, 2016

The dollar overnight lost 0.5% against the kiwi, 0.4% versus the Aussie dollar and sterling and 0.2% relative to the yen and euro.  The dollar is steady against the loonie, Swiss franc and yuan.

Stocks have responded favorably to the Bank of England’s shock and awe response to the Brexit vote. Share prices in the Pacific Rim climbed 1.4% in Hong Kong, 1.3% in India, 0.9% in Indonesia and South Korea, 0.8% in Taiwan and 0.4% in Australia. Japan’s Nikkei closed unchanged, and the Shanghai Composite index lost 0.2%.  In Europe, equities have risen 1.2% in Italy, 0.6% in France, Greece and Spain, 0.4% in Switzerland and 0.3% in German and Great Britain.

The 10-year German bund yield ticked a basis point higher, while its Japanese counterpart is a basis point more negative today than yesterday. Gilt yields are very low historically but not more so than yesterday.

West Texas Intermediate oil dropped 0.9% to $41.56 per barrel, trimming the strong back-to-back advances on Wednesday and Thursday.  Comex gold at $1,367.60 per ounce is steady.

The Reserve Bank of Australia’s quarterly Monetary Policy Statement mentions many downside growth risks without changing the baseline forecast.  Core inflation is projected to be close to the floor of the 2-3% target even in late 2018. Worries about an overheated housing market have lessened greatly.  The Official Cash Rate was cut this week to a record low of 1.5%, and while not indicating the likely direction or timing of the next change, analysts are concluding that policy still has an easing bias.

New public presidential opinion polls in the United States show a widening lead for Clinton both nationally and in several key states like Pennsylvania, Florida, Michigan and New Hampshire.

German industrial orders in June were weaker than forecast, dropping 0.4% on month and 3.1% on year.  Weakness was concentrated in a 1.2% decline of export orders. Orders for domestic capital goods actually increased 2.3% on month, but overall orders in the second quarter recorded a 0.5% drop relative to the first quarter’s mean level.

Four Japanese indicators were reported:

  1. International reserves fell $652 million in July following a $1.14 billion rise in June and an $8.54 plunge in May.
  2. The index of leading economic indicators in June printed at the same very low 98.4 level as in May. For a 13th consecutive month, officials characterized the trend of the index of coincident economic indicators to be “weakening.”
  3. Labor cash earnings advanced 1.3% on year in June versus a dip of 0.1% in May and no change in April.
  4. The customs trade deficit in the first twenty days of July of JPY 106 billion was unchanged from a year earlier. Exports, which had dropped only 7.4% on year in full-June, dropped 14.0% in July 1-20. This almost matched a 14.4% slide in imports, which had declined 18.8% in June.

France’s current account deficit of EUR 0.6 billion in June was twice May’s shortfall.

Italian industrial production unexpectedly fell 0.4% on month and 1.0% on year in June.

Norwegian industrial production dived 5.1% on month and 8.7% on year in June.

Spanish industrial output eased 0.2% on month and rose just 0.8% on year in June.

Hungarian industrial production fell 2.4% in June and was 0.3% softer than a year earlier.

Wholesale prices in Austria recorded a 3.3% 12-month rate of decline in July.

Indonesian real GDP rallied 4% on quarter and surpassed its year-earlier level by 5.2% during 2Q16.

Australia’s construction purchasing managers index slipped 1.6 points to a 2-month low of 51.6 in July.

At 08:30 EDT, the U.S. labor department reports its monthly jobs data, and the Commerce Department will be releasing trade figures.  Canada also releases labor statistics and trade data today.  Canada’s IVEY-PMI index arrives as well.

The opening ceremony of the 2016 Olympics in Rio De Janeiro is tonight. Meant to trumpet Brazil emergence as a major world player, 2016 instead finds Latin America’s largest economy grappling with an extremely severe recession and the nation’s politics in shambles.

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

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