Tuesday-Wednesday Rundown

March 7, 2018

During these past two days, the dollar dropped over 1.0% against the won, 0.7% versus the Aussie dollar, 0.6% relative to the euro, 0.5% vis-a-vis the Canadian dollar 0.4% against sterling but just 0.1% versus the yen.

U.S. stocks closed down today and are below Monday’s close. British, German and Japanese equities also lost net ground these past two days. The 10-year Treasury yield is unchanged from Monday, but its German bund and Japanese JGB ticked a basis point higher.

The U.S. Northeast is coping with its second destructive winter storm in March no less, and they tell us over and over again that they don’t believe the global climate is changing for the worse. The non-believers better hope they are right, because economic growth otherwise faces headwinds.

Another key member of the Trump Team, top economic adviser Gary Kohn, has resigned. His departure is likely to intensify America’s lurch toward protectionism. The U.S. goods and services trade deficit in January was 16% wider than a year earlier.

The Fed Beige Book released this afternoon observes that steel prices are already rising faster. Protectionism, which safeguards the few at the expense of the many, does that. The labor market also tightened further in the latest FOMC cycle. All in all, the report points to more, rather than fewer, interest rate hikes this year.

Other central banks that reported monetary policy reviews in the past two days — Australia, Turkey, Poland, and Malaysia — left interest rates unchanged. The interesting thing here is that central bank news that in theory ought to support the dollar isn’t doing so. And that’s consistent with an agenda that’s highly protectionist. When the trade balance becomes priority number one, currency weakness becomes the means to the end.

Net exports contributed two-thirds of  Euroland GDP growth of 0.6% last quarter. On-year growth of 2.7% was half due to the stimulus of net exports. Personal consumption and business investment contributed the rest.

Productivity in the U.S. was unchanged last quarter but 1.1% higher than in the final quarter of 2016.

Productivity in Canada rose a percentage point faster in 2017 than in the United States.

Euroland’s retail purchasing managers index rebounded 1.5 points to 52.3 last month but was still below the December level.

Germany’s construction PMI fell 7.1 points to 52.7. Australia’s construction PMI rose 1.7 points to 56.0.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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