More U.S. Dollar Declines

March 14, 2018

The dollar lost some additional ground overnight, dipping 0.7% against the Aussie currency, 0.5% relative to the peso after Trump examined border wall prototypes, 0.3% versus the loonie, and 0.2% vis-a-vis the yen, kiwi, yuan, and sterling. The dollar, however, is unchanged on net against the euro and Swissie.

In U.S. news prior to the release today of retail sales, PPI, NAHB housing and Treasury TIC data, Democrat Conor Lamb is holding on to a razor-thin 0.3 percentage point lead in the Pennsylvania congressional district 18’s special election. Markets have reacted nervously to the firing of Secretary State Tillerson, which is the latest in a relentless exodus of top Trump administration officials. Physicist Stephen Hawking has died, and Broadcom officially withdrew its bid to acquire Qualcomm.

Chinese retail sales, industrial production and business investment data for January-February combined were stronger than forecast. Retail sales posted on-year growth of 9.7%. Industrial production went up 7.2%, and fixed asset investment was 7.9% greater than a year earlier.

Share prices in the Pacific Rim dropped 0.9% in Japan, 0.7% in Australia, 0.6% in China and New Zealand, 0.5% in Indonesia and Taiwan, 0.4% in Hong Kong and Singapore, and 0.3% in South Korea. But in Europe, equities have risen so far by 0.5% in Germany and Switzerland, 0.4% in France, and 0.3% in the U.K. and Spain.

There hasn’t been much movement in 10-year sovereign debt yields overnight. The Treasury yield remains about midway between 2.9% and 2.8%.

Among commodities, oil and industrial metal prices rose meaningfully, but gold is flat.

Japanese core private domestic machinery orders bounced back 8.2% in January following their 9.3% slump in December. Foreign orders similarly rose 11.6% in the latest month after an 8.2% drop in December, but public-sector orders dived 18.7% after a 1.8% rise the month before.

Employment in the euro area posted quarterly growth of 0.3% in 4Q, somewhat less than during the previous quarters of 2017, and was 1.6% higher than in the final quarter of 2016. Industrial production in Euroland recorded a larger-than-forecast 1.0% monthly decline in January, which halved the 12-month rate of increase to 2.7%. Energy slumped 6.6% on quarter, and output of consumer durables and intermediate goods each fell more than 1.0%.

German CPI inflation last month was confirmed at the preliminary indication, a rise of 0.5% on month but the smallest 12-month increase (1.4%) in over a year. Core CPI inflation in February edged up to 1.6%.

The National Bank of Serbia cut its key policy interest rate by 25 basis points to 3.25%, citing lower inflation lately. The previous change was a 50 basis point cut last October, which had been the only adjustment of 2017.

The Central Bank of Iceland retained a 4.25% 7-day term deposit rate, the level since a 50-basis point cut in August 2016.

Elsewhere on the central bank watching front,

  • A top official of the Reserve Bank of Australia said that markets may be underpricing the speed of the coming policy normalization and said that increases of more than 25 basis points a time should not be ruled out.
  • ECB President Draghi reaffirmed that the exit from policy stimulus should be patient, persistent, and prudent and also consistent with confidence that appropriate inflation will be sustained. ECB Governing Council members Coeure and Praet more or less echoed that sentiment and identified a need for clearer policy guidance.
  • Minutes of the Bank of Japan’s January 21-22 Board meeting expressed confidence that policy stimulus can be unwound smoothly and without unsettling markets but said it’s still too soon to get into specifics.

New Zealand experienced a NZD 1.951 billion seasonally adjusted current account deficit last quarter, the biggest shortfall in three quarters. The deficit in 2017 equaled NZD 7.72 billion. As a percent of GDP, the gap is hovering around 2.7%.

The Westpac consumer sentiment index for Australia edged up 0.2% in March and is little changed from its end-2017 level.

Indian wholesale price inflation slowed for a third straight time in February, printing at 2.48%, lowest in 7 months, versus 2.84% in January and 3.93% last November. Fuel and food price pressures are settling back.

Between January 2016 and January 2017, retail sales rose 2.2% in Spain but fell 0.8% in Italy. In the same span, industrial output climbed 8.7% in Romania and 6.7% in Hungary.

Finnish CPI inflation, which had been sliding for a year and a half before a 0.2 percentage point uptick in December, slipped back to 0.6% in January from 0.8% the month before. Swedish CPI inflation last month stayed at 1.7%.

U.S. retail sales posted an unexpected decline in February of 0.1%. This is the first time in almost six years that such has declined in three straight months, but the on-year changes were decent at 4.0% in February alone and 4.3% in December-through-February.

U.S. producer prices rose 0.2% in February, lifting the 12-month rate of increase to an as-expected 2.8%. Core PPI, which excludes food and energy, accelerated 0.3 percentage points to 2.5%, and the PPI index that excludes food, energy and trade rose 0.2 percentage points to 2.7%.

Still to come: the NAHB U.S. housing market index and Treasury-compiled capital flow data.

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


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