Mixed Dollar Ahead of GDP Release and 5-Year Treasury Auction

June 26, 2013

The dollar rose overnight by 0.4% against the euro and sterling, 0.2% relative to the Swiss franc and kiwi and 0.1% against the yuan.  The dollar also lost 0.4% versus the Canadian dollar and yen and 0.5% against the Australian dollar.

Chinese money markets are showing less strain but still not back to normal.

Former Prime Minister of Australia Kevin Rudd has defeated Julia Giliard for the Labour Party leadership by a vote of 57-45 and thus becomes prime minister again.  But he faces Tony Abbott in national elections no later than September 14.

Share prices mostly rose in Asia and Europe.  Stocks climbed 5.7% in the Philippines, 3.8% in Indonesia, 2.4% in Hong Kong, 1.8% in New Zealand and 1.6% in Australia and Taiwan.  But Chinese equities eked out only a 0.1% uptick, and Japan’s Nikkei dropped by 1.0%.  In Europe, stocks have advanced 1.9% in Spain, 1.5% in France and Italy, 1.3% in Germany and 1.0% in Britain.

Gold plunged 3.3% through $1250 to $1232.20 per ounce.  Oil dropped 0.6% to $94.77 per barrel.

The ten-year British gilt yield slid five basis points to 2.48%.  The 10-year German bund is a basis point lower, while the 10-year Japanese JGB increased by 2 bps.

ECB President Draghi gave a speech underscoring the limits of what monetary policy can accomplish and urging politicians to enact reforms to improve the potential trend in economic growth.  Mervyn King is stepping down at the end of June after a decade as Bank of England governor.  The tone of his farewell public remarks was downbeat.

French GDP contracted 0.2% in both 4Q12 and 1Q13 and was 0.4% softer than in the first quarter of 2012.  Business investment, exports, and personal consumption posted quarterly declines of 1.0%, 0.4%, and 0.1% in 1Q.

German consumer confidence improved unexpectedly from 6.5 in June to 6.8, a 70-month high, in July.  But the prestigious IFO Institute projected GDP will grow just 0.6% in Germany this year followed by 1.9% in 2014.

The UBS Swiss consumption indicator rose to 1.46 in May.  April’s reading was initially estimated at 1.46 but revised to 1.43.  The gauge is 0.44 points above its level in May 2012.

Norwegian unemployment eased to 3.5% on average in the three months to May from 3.6% in the three months to February.

The Central Bank of Sri Lanka has cut bank deposit reserve requirements to 6% from 8%.  This reduction of 200 basis points follows interest rate cuts of 25 basis points last December and 50 bps in May and is intended to supplement those easings by reducing Sri Lanka’s lending-deposit rate spread closer to regional norms and by promoting a further decline in lending rates.

Business sentiment in South Korea worsened for a fourth straight month.  Thailand’s trade deficit of $2.3 billion in May was 36% wider than a year earlier.  Industrial production in Singapore was 2.1% higher in May than a year earlier, a gain which beat expectations.

The United States releases the third estimate of first-quarter GDP and weekly oil inventory data.  A 5-year Treasury debt auction is also scheduled.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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