Dollar Down Ahead of Greek Vote on Austerity Later Today

June 29, 2011

The euro topped $1.4400 for the first time in a week and is 0.4% higher on balance.  The dollar has also lost 1.2% against the kiwi, 0.6% relative to the Australian dollar, 0.5% versus the Canadian dollar, 0.2% against sterling, and 0.1% relative to the yuan.  Dollar/yen and dollar/Swiss are unchanged. Dollar/Swiss was as weak as CHF 0.8297 after setting a record low of CHF 0.8271 on Tuesday.

Markets expect the EUR 78 billion package of tax hikes, spending cuts and government asset sales in Greece to pass narrowly.  The vote is expected in mid-afternoon local time.

French Finance Minister Christine Lagarde, a trained lawyer and European, has been chosen to head the IMF.

Commodities are up on optimism that the Greek austerity package will be passed and ahead of the weekly release of U.S. oil inventory figures.  Gold and oil prices increased 0.6% and 0.9% to $1509.60 per ounce and $93.75 per barrel.

Ten-year sovereign debt yields rose by six basis points in Britain and by four bps in Japan and Germany.

Stronger-than-forecast Japanese data were released.

  • Industrial production advanced 5.7% on month in May, cutting the 12-month rate of drop to 5.9% from 13.6% in April.  Survey evidence points to a another increase of at least 5% in June, and officials upgraded their assessment to “industrial production is on a recovery trend.”  The assessments in March and April were “drops sharply” and “appears sluggish,” respectively.
  • The Shoko Chukin index of Japanese small business sentiment recovered to a reading in June of 43.1 from 37.8 in May and 36.1 in April.  But such remains below the pre-quake 49.5 March reading.

Euroland sentiment indices were published for June.  Overall economic sentiment posted a fourth consecutive drop, scoring an 8-month low of 105.1 after 105.5 in May, 106.1 in April, 107.3 in March and a peak of 108.0 in February.  The business climate reading of 0.92 was the lowest since September and down from 0.98 in May.  Consumer confidence firmed a tenth to minus 9.8, and service sector sentiment rose 0.6 to +9.9.  Industrial sector sentiment slid 0.6 to a 7-month low of 3.2.  Retail stagnated at minus 2.4.  Construction sentiment improved 1.1 points but stayed very low at minus 23.6.

French first-quarter GDP growth was revised downward to 0.9% from 1.0% reported initially.  GDP went up 1.4% last year and by 2.2% between 1Q10 and 1Q11.  During the first quarter, final domestic demand enhanced GDP growth by 0.6 percentage points (ppts), and there was a 0.4 ppt augmentation from inventories.  But net exports exerted a 0.4-ppt drag as imports increased 3.0% and outpaced a 1.8% advance in exports.

Spanish retail sales were 5.8% lower in May than a year earlier, the eleventh drop in a row.  Prime Minister Zapatero is unlikely to gain budget approval and would likely lose an ensuing election later this year.

Irish retail sales were 2.1% lower than a year before in May.  The Irish jobless rate ticked 0.1 ppt higher in May to 14.2%.  Hungary’s unemployment rate averaged 11.0% in March-May.

Greek producer prices fell 1.3% on month in May and to a 12-month increase of 7.3% from 8.2% in the year to April. 

British mortgage approvals of 45,940 in May were a tad below expectations.  So was net consumer credit growth of GBP 0.2 billion.  U.K. M4 edged up 0.1% on month but slid 0.2% on year in May.  The British monthly services index sank 1.2% in April when there was an extra national holiday for the royal wedding.  The 12-month increase also slowed to 0.8% from 1.2% in both February and March and a gain of 1.8% in the year to January.

The Swiss index of leading economic indicators fell to 2.23 in June from a reading of 2.30 in May.

Skilled labor job openings in Australia rose 0.3% on month but contracted 2.0% on year in June.

Producer price inflation in Singapore settled back to 7.6% in May from 7.8% in April.

As expected, the National Bank of Romania left its key monetary policy rate steady at 6.25% and made no changes in reserve requirements, either.

Canadian CPI inflation accelerated to a 12-month rate of 3.7% in May, highest since March 2003, from 3.3% in April.  Gasoline price inflation rose to a 68-month high of 29.5% on year from 26.4% in April.  All other consumer prices collectively posted a 12-month increase of 2.4% after 2.2% in the year to April.  The seasonally adjusted monthly CPI increase in May versus April was 0.3% for both the all-items index and the core measure of inflation.  Unadjusted core inflation of 1.8% on year was still below the Bank of Canada’s 2.0% target.

U.S. pending home sales figures will be released at 14:00 GMT.

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

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