Commodity Currencies Up, Sterling Down

March 24, 2011

The dollar has fallen 0.9%, 0.5%, and 0.3% against the New Zealand, Canadian, and Australian dollars.  At $1441.39 per ounce, gold prices are within $4 of their intra-day record high and 0.2% firmer than Wednesday’s close.  Oil advanced 0.7% to $106.46 per barrel and hostilities continue in Libya.

Sterling has fallen 0.3% further against the dollar.  Bank of England minutes released yesterday were not as hawkish as hoped.  The government budget revised economic growth downward and projected government borrowing somewhat higher as a result.  U.K. retail sales figures out today are disappointing.

The dollar lost 0.2% against the euro and remains weaker than $1.41.  The dollar edged 0.1% against the yen and continues to be held between 80 and 82/USD by government authorities. The dollar rose 0.2% against the Swiss franc and 0.1% relative to the Chinese yuan.   A senior Chinese central bank officials indicated that interest rate increases would be used more readily in the future to counter inflation.

Portugal appears headed for elections and an IMF/EU bailout a la Greece and Ireland following the as-expected parliamentary rejection of the fiscal austerity bill and subsequent resignation of Prime Minister Socrates.

Ten-year bond yields are mixed, with German bunds unchanged, Japanese JGBs down a basis point, and British gilts up two basis points.

The central bank in the Philippines, which had been one of very few Asian monetary authorities not to raise interest rates yet, did so, lifting its key borrowing rate and key lending rate by 25 basis points each to 4.25% and 6.25%.  The action was expected, being foreshadowed by a more hawkish statement following the previous policy meeting on February 12.

Some solid Euroland data were released.  Flash purchasing manager indices for March showed strength persisting through the whole first quarter, implying growth of around 0.8% for the whole euro area, 0.7% in France, and 1.5% in Germany.

  • The preliminary estimate of Euroland’s composite PMI of 57.5 followed a 43-month high of 58.1 in February and a reading of 57.0 in January.  The services index printed at 56.9, a tenth better than in February and the best score since August 2007, while the factory index of 57.7 was down from February’s 59.0 but above January’s 57.3.
  • Germany’s composite, services, and manufacturing PMI readings were each above 60 in March at 60.6, 60.1 and 60.9, respectively.  The jobs component was at a record high.
  • The French composite PMI improved to 59.6 from 59.0 in February and 57.6 in January.  The services PMI touched an 8-month high of 60.7, while the manufacturing index climbed 0.9 to a three-month high of 56.6.  Elevated inflation pressures failed to abate, however.

Another pleasant surprise came from the French government’s measure of business confidence, which jumped three points to 109 in March from 106 in January and February and a score of 98 six months earlier in September 2010. 

Dutch 4Q10 GDP grew 0.6% on quarter and improved to an on-year pace of 2.5% from 1.8% in 3Q.

Italian consumer confidence, however, fell to 105.2 from 106.3 in February and 105.9 in January.

British retail sales volume fell 0.8% last month and was just 1.3% greater than a year earlier.  Sales in the three months to February were up 0.1% from the prior three months and 1.7% from a year earlier.  Non-auto retail sales were unchanged in the latest three-month period.

Czech business and consumer confidence both fell this month as they had also done in February.

Swedish producer prices were unchanged in February and up just 0.3% on year.  Both comparisons were smaller than anticipated.

New Zealand barely avoided a second straight quarter of negative economic growth.  GDP firmed just 0.2% in 4Q after an earthquake-depressed 0.2% drop in 3Q10.  An even more devastating temblor earlier this year is likely to result in a negative first-quarter growth rate.  GDP in 4Q10 was 1.5% greater than a year earlier.

Australia’s index of leading economic indicators rose just 0.1% in in January, down from a 0.7% gain in December.  The index of coincident indicators also went up 0.1% in the latest reported month.

Japan’s February unadjusted customs clearance trade surplus of JPY 654 billion was not as large as projected even though a 9.9% on-year rise of exports outstripped a 2.5% gain in imports.  The bilateral surplus with the United States only rose 0.8%, while those with Asia and the EU climbed by 25.8% and 20.8%.  The seasonally adjusted trade surplus in February of JPY 556 billion was more than twice as wide as January’s JPY 269 billion surplus.

The most immediate psychological concern in Japan is nuclear fallout.  Greater damage was caused by the temblor and ensuing tsunami, and information regarding the status of the Fukushima reactors is about the same.

According to HSBC preliminary calculations, China’s manufacturing purchasing managers index improved to 52.5 in March from 51.7 in February but was still below readings of 54.4 in December and 54.5 in January.  Orders expanded at a slower rate than in February.

The Hong Kong trade deficit widened to HKD 25.1 billion in February from HKD 16.0 billion in January and HKD 19.7 billion a year earlier.  On-year export and import growth of 24.9% and 25.2% surpassed expectations. 

Central bank rate decisions are awaited today in the Czech Republic and South Africa.  Scheduled U.S. data include durable goods orders and monthly jobless insurance claims.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.

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