British and Chinese Currencies Weaken at Start of a New Week

January 13, 2020

Sterling fell 0.6% against the dollar overnight. British industrial production, down 1.2%, posted the largest monthly decline in seven months during November and was 1.6% lower than a year earlier. Factory output dropped 1.7% on month and 2.0% on year. November’s monthly measure of U.K. GDP showed a 0.3% decline and the smallest 12-month rate of rise (0.6%) since mid-2012. An unexpectedly big goods and services trade surplus in the month of GBP 4.031 billion resulted mainly from an unfavorable 7.8% monthly plunge in imports, and a 1.9% increase of construction output merely followed declines of 2.2% in October and 0.2% in September.

China’s currency dropped 0.4% overnight. In Taiwan’s election over the weekend, Tsai Ing-wen, who favors continuing independence from the People’s Republic of China, was reelected by a landslide vote margin of over 18 percentage points against her pro-Beijing opponent. The experience of Hong Kong has made the Taiwanese people even more distrustful of Communist China’s leader, Xi Jinping. The U.S. and China are expected to sign a Phase I trade deal in the middle of this week.

Japan was closed today for Coming of Age Day, and the yen dropped 0.4% against the dollar.

In Asian stock markets, share prices today climbed 1.8% in Hong Kong, 1.0% in South Korea, 0.7% in Taiwan, 0.8% in China and 0.6% in India, but there’s been little movement in European stock markets.

The dollar edged 0.1% softer against the euro, Swiss franc and Canadian dollar but firmed 0.1% relative to the kiwi and Aussie dollar.

The 10-year British gilt yield fell four basis points in contrast to 2-basis point increases in its U.S. and German counterparts. Among commodity prices, oil and gold are marginally weaker this Monday.

Price data released today reflect less disinflation.

  • The 12-month decline in German wholesale prices  of 1.3% was roughly only half as much in December as in November due to a smaller on-year drop in oil product costs.
  • Indian CPI inflation accelerated for a fifth straight month and at 7.35% in December was far above last January’s 1.97%.
  • Greek CPI inflation rose to 0.8% in December from 0.2% in November and minus 0.7% in October.
  • Czech CPI inflation of 3.2% last month represents an 85-month high.
  • Portuguese CPI inflation was only 0.4% last month but still the most in six months.

A reduction of Brexit uncertainty helped lift Ireland’s construction PMI to 52.0 in December from 48.2 in November. That was the first reading above 50, which signifies improving conditions, since 53.7 in August but still well below a score of 60.5 last February.

Italian retail sales dipped 0.2% in November, marking its fourth drop in five months and resulting in only a 0.9% increase from a year earlier.

On-year growth in Czech retail sales of 2.9% in November was the smallest in six months.

Turkey recorded a $518 million current account deficit in November after a 1.558 billion surplus in October. There had also been a surplus in November 2018.

Poland’s current account surplus widened two and a half-fold on month to EUR 1.46 billion in November.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

 

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