Fresh Bout of Weakness in Turkish Lira
August 17, 2018
The dollar was little changed on net overnight against the the euro, Swiss franc, sterling, yuan, Canadian dollar, Australian dollar or New Zealand dollar, but it jumped 4.8% against the Turkish lira. Turkey’s finance minister said capital controls or a deal with the IMF won’t been necessary. President Trump is considering additional tariffs against Turkey to compel that government to give back the Christian missionary it is holding.
Turkish retail sales slid 0.3% in June after a 1.3% decline in May and were just 4.3% greater than a year earlier, down from a 10.8% 12-month rate of increase last January. Consumer confidence in Turkey fell to the low so far this year of 68.3 in August from a reading of 73.1 in July. Upwardly spiraling inflation has hammered household real disposable income.
The U.S. dollar has also risen 1.0% against the South African rand, 0.8% versus the Russian ruble and 0.6% vis-a-vis the Mexican peso but has slipped 0.4% against the yen.
Ten-year British gilt, German bund and U.S. Treasuries have moved 3, 2, and 1 basis points lower.
West Texas Intermediate crude oil rebounded 0.7% but remains a bit under $66.0 per barrel. Gold and copper prices are steady.
Share prices fell another 1.3% in China today in spite of Thursday’s strong rebound in U.S. equities. The Trump administration’s confidence that America will win a trade war with China is being deepened by the divergent trends in the U.S. and Chinese stock markets.
Elsewhere in the Pacific Rim, share prices rose 0.8% in India, 0.7% in New Zealand, 0.5% in Hong Kong and 0.4% in Japan. But stocks in Europe have dropped so far today by 0.8% in Switzerland, 0.3% in Germany and Spain, and 0.1% in Great Britain.
The euro area’s monthly seasonally adjusted current account surplus narrowed to a first-half low of EUR 23.5 billion in June. Exports of goods and services stagnated after ticking just 0.1% higher in May and falling 0.5% in April. The second-quarter surplus was 30.5% smaller than the first-quarter surplus. However, the current account surplus to GDP ratio over the last 12 months was still a hefty 3.6%.
Consumer price inflation in Euroland was confirmed at 2.1% in July. That’s up from 2.0% in June and 1.3% a year earlier. The on-year rise of energy accelerated from 2.2% in July 2017 to 9.5% last month, while all other consumer prices climbed just 0.2 percentage points collectively to 1.4%. Core CPI, which excludes food and energy was 1.1%, matching May’s reading, up from 0.9% in June but down from 1.2% in July 2017.
In New Zealand, producer output price inflation was at 3.1% last quarter, down from 3.5% in the first quarter and 5.2% in the second quarter of 2017, and producer input price inflation slowed from 4.8% in 2Q17 to 4.2% in the first quarter of 2018 and 3.7% last quarter.
Malaysian GDP grew 0.3% on quarter in April-June, the slowest since the first quarter of 2013, and 4.5% on year, a 6-quarter low in on-year comparisons. Net exports exerted a drag. South Korean unemployment ticked 0.1 percentage point higher to 3.8%. Singapore’s trade surplus declined for a third straight month in July, touching SGD 2.724 billion versus SGD 6.044 billion in April. The threat of a U.S. trade war with China poses a challenge for all of Asia.
The Trumpian vision that every transaction yields a winner and a loser is being validated by the juxtaposition of a U.S. economy humming along while a slew of other economies are slowing down. There are no market or political incentives for America to change course.
CPI inflation decelerated 0.3 percentage points to 1.4% in Cyprus last month but rose to a 7-month high of 2.1% in Austria.
Italy’s EUR 5.135 billion current account surplus in June was the biggest since October 2017.
Canadian consumer prices and the U.S. index of leading economic indicators will be reported later today.
Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Euroland current account and CPI, New Zealand producer prices, Turkish lira
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