Recent Dollar Gains Trimmed
May 10, 2018
The dollar traded down overnight by 0.9% against the peso, 0.3% relative to the loonie, 0.4% vis-a-vis the Australian dollar, 0.3% versus the euro and Swiss franc, 0.2% against the yuan, and 0.1% versus the yen.
There’s been an Israeli air strike on Iranian targets in Syria, lifting fears that tensions will continue to escalate between Iran and Israel, now that Trump has abandoned the Iran nuclear deal. West Texas Intermediate crude oil climbed 0.5% further to $71.52 per barrel. Comex gold also advanced.
Opposition forces unexpectedly defeated Malaysian Prime Minister Najib Razak, capturing 121 of 222 parliamentary seats.
Investors await the release of U.S. consumer price data. The 10-year Treasury yield meanwhile again failed to hold its beach head above 3.0% and has settled back 3 basis points to 2.97% in futures trading. The ten-year British gilt and German bund yields slipped by 2 and 1 basis points.
Several markets did not open today in countries observing Ascension Day, such as Indonesia, Switzerland and Norway. Among markets that are trading, equities rose 0.8% in South Korea, 0.5% in China and Hong Kong and 0.4% in Japan. The German Dax and British Ftse are up 0.3% and 0.2%, but in Italy, which is mired in political chaos and facing another election, stocks sank 1.2%.
There have been a number of central bank monetary policy meetings.
- The Bank of England kept the Bank Rate steady at 0.50% in a 7-2 vote. The Monetary Policy Committee is agreed that more rate normalization will be needed but concedes that March CPI inflation of 2.5% was lower than expected. The majority view wants to see more data to confirm that pronounced softness recently in the economy will be partly temporary. There were two votes to hike rate but a unanimous decision not to change quantitative stimulus. A doubling of the Bank Rate occurred a half year ago.
- The Reserve Bank of New Zealand kept its Official Cash Rate at 1.75% but released a more dovish statement than expected that projects no tightening of the very stimulative stance for a “considerable period of time,” which investors read to mean that a further cut cannot be ruled out. The OCR was halved between June 2015 and November 2016. The kiwi depreciated 0.8% today against the U.S. dollar in response.
- Bank Negara Malaysia retained a 3.25% overnight policy rate. Officials project moderate inflation ahead but concede some uncertainty posed by oil prices. The policy rate was raised 25 basis points in January, a move that erased a 25-bp cut in July 2016 and which was the first increase in 3-1/2 years.
- The Filipino Monetary Policy Board hiked its overnight reverse repo rate to 3.25% from 3.0% and also lifted overnight lending and deposit rates similarly. More broadly based inflation is projected in the future, and officials aim to prevent a buildup of inflation expectations.
- The National Bank of Serbia kept a 3.0% policy interest rate. While core inflation is presently at a record low, central bank officials anticipate total inflation rising to near the target floor by the end of this year and its midpoint of 3% by the second half of 2019.
Chinese consumer prices posted a second straight on-month decline of consumer prices, cutting the 12-month rate of increase to 1.8% in April from 2.1% in March and 2.9% in February. Producer prices were 3.4% higher than a year earlier.
Japan recorded a JPY 3.12 trillion current account surplus in March and a surplus of JPY 21.74 trillion last fiscal year up from JPY 21.0 trillion in fiscal 2016. March’s seasonally adjusted current account surplus almost doubled on month to JPY 1.77 trillion.
In other released Japanese data, there were 4.4% fewer bankruptcies in April than a year earlier, Bank lending growth unexpectedly accelerated last month to 2.1%, and the economy watchers index, a gauge of service sector activity, edged up 0.1 point to a 3-month high of 49.0. That still below 50, however, a line in this diffusion index that separates improvement from deterioration.
Britain’s goods and services trade deficit widened to a 9-month high of GBP 3.09 billion in March. The merchandise trade deficit was GBP 12.287 billion.
British industrial production recorded the same 0.1% monthly uptick in March as it had in February, and factory output slid 0.1%. Construction output sank 2.3% on month on top of a 1.0% decline in February and was 4.9% below its year-earlier level. March weather was unseasonably terrible.
Italian industrial output rebounded 1.2% in March after falling 0.5% in February, swelling its 12-month increase to 3.6%.
The on-year change in Irish consumer prices in April, a drop of 0.4%, was negative for the first time since last July.
Greek unemployment ticked up 0.1 percentage in February after touching a 20.7% 6-year low in January. Greek consumer prices rose just 0.5% in the year through April.
Filipino GDP remained buoyant last quarter, posting an unchanged 1.5% quarter-on-quarter advance and a rise of 6.6% from a year earlier.
Just in: U.S. consumer prices rose 0.2% last month and were 2.5% above the April 2017 level. Core CPI inflation stayed at 2.1% instead of ticking up 0.1 percentage point as expected. U.S. jobless insurance claims stayed incredibly low last week, slashing the 4-week average to 216K from 230K in the previous four week through April 7th.
Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British trade and industrial production, Chinese and U.S. CPI, Japanese current account