Covid News Proceeding on Two Tracks, While Dollar Slipping but Slows

November 18, 2020

There’s been more good news regarding Covid vaccine developments as Pfizer’s product, like Moderna’s, has been shown to be 95% effective. Before vaccines can be distributed widely, however, current spikes in cases and deaths point to a very difficult winter ahead for public health and economic activity. New U.S. cases and deaths yesterday approached 160,000 and 1600, respectively, and global deaths are now hovering around 1-1/3 million.

Renewed restraints on activities that require social gathering continue to be imposed in the United States and Europe to counteract Covid. The need for such has dampened economic outlooks, and the Central Bank of Iceland became the latest central bank to cut interest rates in response.

Monetary officials in Iceland cut their seven-day term deposit rate by 25 basis points to 0.75%, bringing the cumulative rate reduction since February to 225 basis points. Today’s was the first cut since a 75-basis point reduction in May. A released statement from the Monetary Policy Committee also announced that Icelandic GDP is likely to drop in 2020 by a percentage point greater than the minus 7.5% figure predicted back in August. Growth in 2021 also was downgraded. Today’s action was done in spite of a recent uptick in inflation to 3.6%, but officials note that inflation expectations remain anchored.

The Bank of Thailand‘s Monetary Policy Committee also reviewed monetary policy and agreed unanimously to leave its key interest rate unchanged at 0.50%. Three 25-basis point cuts were previously administered from February to May. Officials’ main concern at the moment, according to a released statement, is the appreciation of the baht that conceivably could endanger an already fragile and slowing economic recovery.

The U.S. Senate failed to confirm President Trump’s controversial nomination of Judy Shelton to fill a vacancy on the Federal Reserve Board of Governors. Trump is maintaining a multi-dimensional campaign to impede the transition to a Biden Presidency, firing key public officials, depriving the President-Elect of access to key intelligence briefings,  challenging the legality of election results in several states, and reportedly considering foreign policy initiatives that will corner the new administration into awkward stances.

The dollar fell overnight by 0.4% against the New Zealand dollar, 0.3% versus the yen, by 0.2% relative to sterling and the loonie, and 0.1% vis-a-vis the Australian dollar. The dollar touched a 30-month low against China’s currency and a 1-1/2 month low versus the Turkish lira but managed to fall no further against the euro, Swiss franc or peso.

Share prices dropped 1.1% in Japan and 1.3% in New Zealand but rose 1.3% in Taiwan, 0.5% in Hong Kong and India, and 0.2% in China. Gains so far in Euroland’s big-three economies range from 0.3% in Germany to 0.6% in France and 0.7% in Italy. U.S. futures are up even less, and ten-year sovereign debt yields are unchanged in the  United States, Germany, Great Britain, and Japan.

Among commodities, the price of WTI oil rose 2.1%, but that for gold dropped by 0.8%. The price of a bitcoin has climbed to a 34-month high.

Japan’s seasonally adjusted trade surplus contracted 29% on month in October as import growth outpaced export growth by two to one. The unadjusted surplus of JPY 873 billion reflected an on-year export dip of 0.2% and a much larger 13.3% decline in imports.

Euroland CPI was one of many inflation reports released today. Last month such remained at September’s 53-month low of -0.3%, and core inflation held at the record low of 0.2%.

British consumer prices in October were unchanged on month but up 0.7% on year, a 3-month high.

Canadian CPI inflation rose 0.2 percentage points to a 4-month high of 0.7% in October.

Austrian consumer price inflation slipped 0.2 percentage points to 1.3%, a 4-month low.

New Zealand producer output prices fell 0.3% on quarter and rose just 0.1% on year during the third quarter of 2020, while producer input prices climbed 0.6% on quarter and fell 0.4%  on year.

Portuguese producer prices ticked up 0.1% on month but matched September’s 4.6% 12-month rate of decline, which had been the largest drop since March.

British producer output prices head steady on month in October and posted an eight straight year-on-year decline, this time of 1.4%. Producer input prices rose 0.2% on month and fell 1.3% on year.

Australia’s quarterly wage cost index edged up 0.1% in 3Q, depressing the year-on-year rate of increase to 1.4% from 1.8% in 2Q and 2.2% in the first quarter of 2020.

Australia’s Westpac-compiled index of leading economic indicators only rose 0.1% further last month, down from monthly gains of 0.6% in August and 0.2% in September. Meanwhile, another Australian release today showed a 1.3% monthly drop of new home sales in October, their first decline since July.

South African retail sales continued to rebound in September, but their year-on-year comparison remained in the red at -2.7% versus a nadir of -49.9% back in April.

New car sales in the European Union were 7.8% below their year-earlier level in October.

Chilean real GDP rose 5.2% in the third quarter but nevertheless posted its third on-year decline (this time of 8.1%) in the past four quarters.

U.S. housing starts jumped 4.9% in October to an 8-month high, and building permits remained at September’s level and were 2.8% above the level in October 2019.

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

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