Euro Touched 49-Month Low

May 17, 2010

Market movement has grabbed overnight attention in environment of relatively light data and event calendar.

  • The euro touched $1.2232, its weakest value since April 18, 2006.
  • The dollar has risen 0.4% against the euro, Swiss franc, and Canadian dollar.
  • The greenback’s gains have been stronger against sterling and the Aussie dollar (0.9% in both instances) and the kiwi (0.8%).
  • Dollar/yen remains steady at 92.46.
  • Sovereign bond yields are down 8-9 basis points in Germany and Britain.  10-year JGB off by lesser 2 bps.
  • Stocks in the Pacific Rim plunged 5.4% in China, 3.1% in Australia, 2.2% in Japan and Taiwan, 2.6% in South Korea, 2.1% in Hong Kong, 2.0% in Thailand, 1.4% in Indonesia, and 1.1% in India.
  • Stocks in Europe, in contrast, show gains of 12% in Germany, 1.0% in Britain, and 0.6% in France.
  • Gold is up 0.3% at $1231.80 per ounce, whereas oil slid 0.3% to $71.39 per barrel.

Core Japanese domestic machinery orders advanced 5.4% in March and by 2.9% in the first quarter against official expectations of a 2.0% increase in the quarter.  Orders exceeded their March 2009 level by 1.2%.  The government projects a 1.6% rise in the second quarter.  Foreign orders for machinery rose 3.9% in March and 13.4% in 1Q.  These data point to strengthening industrial production and business investment and to a continuing economic recovery.

Japanese domestic corporate goods prices rose 0.4% in April, twice as much as in March, trimming on-year CGP deflation sharply to 0.2% from 1.3% in March.  Tokyo Condominium sales were 22.6% greater than a year earlier in April, down from a rise of 54.2% in the year to March.

A result of Euroland’s sovereign debt crisis has been to dampen expectations about how soon Beijing officials will begin allowing yuan appreciation to resume.

In Britain, the CBI industrial trends survey in May produced an index for orders of minus 18, best since August 2008 and down from readings in the first four months of 2010 that ranging from minus 39 in January to minus 36 in April and February.  A score of minus 59 in July 2009 was the weakest point.  The Rightmove house price index went up only 0.7% in May, cutting its 12-month rate of increase to 4.3% from 6.0% in April.  The new British Chancellor of the Exchequer, Osborne, warned that recovery is jeopardized by the rise of the economy’s debt.

Swiss monetary authorities are still intervening heavily, selling francs for euros.

Car sales in Euroland were 7.4% lower in April.  March-April data were distorted by the Easter factor.

Swedish industrial production was 6.7% greater in March than a year earlier.  The Netherlands recorded a EUR 4.6 billion trade surplus in March.  Danish WPI inflation accelerated to 5.1% in April from 4.1% in March.

Czech producer prices rose 0.4% in the year to April after falling 0.8% in the year to March.  The Czech current account showed a deficit of CZK 12.6 billion in March rather than a surplus as analysts had forecast.  Romania’s current account deficit of EUR 1.5 billion in 1Q10 was 65.5% greater than a year before.

A member of the ECB’s Governing Council, Nowotny, expressed unconcern about the euro’s level and reiterated that bond purchases will be sterilized so as not to impact monetary growth.

Consumer confidence in Turkey improved 1.2% to 85.9 in April from 84.7 in March.  Turkey had a smaller 14.4% jobless rate in February than forecast.

Scheduled U.S. data today include Treasury-reported capital flows, the National Association of Home Builders index, and the Empire State factory index.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.



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