Canadian Dollar, Australian Dollar and Chinese Yuan Are Weaker

February 21, 2014

The loonie has traded 0.6% lower against its U.S. counterpart ahead of the release of Canadian retail sales later today, which probably did poorly.  Canadian consumer prices also arrive.

The yuan, off 0.2% today, will post its greatest weekly slide in a few years.  Chinese stocks fell 1.0% on concerns about the growth outlook in the world’s second largest economy.  Other Asian bourses rose in contrast (see below).  The Aussie dollar also has slid by 0.2%.

The dollar otherwise is up 0.1% versus the yen, euro, Swissie and kiwi but off 0.1% relative to sterling.

Most stocks rose in the Pacific Rim following the North American lead, which rallied Thursday after Markit Economics reported a 3.0-point jump in its estimate of the U.S. manufacturing purchasing managers index.  Such printed at 56.7 after 53.7 in January.  Share prices gained 2.9% in Japan (419 points in the Nikkei), 1.4% in South Korea, 1.0% in Indonesia, 0.8% in Hong Kong and India, 0.9% in Taiwan, 0.5% in Australia and 0.4% in New Zealand.

In Europe, the German Dax is unchanged, and equities are down 0.3% in Spain and Italy.  The Paris Cac, British Ftse and Zurich SMI show gains of 0.2%.

The ten-year British gilt yield eased a basis point, while the 10-year Japanese JGB recovered two basis points from its low of 0.57%.  German bunds are steady, but sovereign debt yields has slipped three bps each in Spain and Italy.

Gold rose 0.3% to $1,321.40 per ounce, while oil settled back 0.3% to $102.43 per barrel.  U.S. natural gas prices continued to move sharply higher.

Ukrainian President Yanukovych has offered a deal that includes early presidential elections.  It remains to be seen if such is accepted by his opponents.  S&P in any case downgraded the Ukraine’s credit rating to CCC and imposed a negative outlook.

Group of 20 finance ministers and central bankers meeting in Sydney, Australia, are said to accept the principle of reduced quantitative stimulus by the Fed.  U.S. Treasury Secretary Lew urged Japan to implement structural reforms especially in the labor market to supplement monetary and fiscal stimulus.

Minutes from the Bank of Japan’s meeting of January 21-22 express some concern about over-reliance on yen depreciation for progress to date in restoring positive inflation.  Three recovery risks — U.S. growth, Euroland’s debt problems, and the health of commodity producers — were explicitly mentioned, but the Japanese baseline forecast continues to be one of continuing moderate recovery.  Japanese inflation forecasts were not changed.

British retail sales suffered a significant setback in January following a string of solid growth.  A 1.5% monthly drop in volume was the largest decline in 21 months, but such showed a January-over-January increase of 4.3%.  Sales volume in November-January were 1.1% greater than in the prior three-month period and 3.9% higher than a year earlier.  Nominal retail sales fell 1.8% on month but rose 4.4% on year.  Core nominal sales (excluding auto fuel) also dropped 1.8% from December but rose 5.2% compared to the January 2013 level.

There was a GBP 6.425 billion surplus in U.K. public sector borrowing, but that was smaller than a year earlier; January is typically a repayment month.  Outstanding debt in January equaled 74.6% of GDP.

Italian January consumer prices rose 0.2% on month and 0.7% on year, which was the same as in December.  In harmonized terms, however, inflation edged down to 0.6% from 0.7%.

The Conference Board reported that Germany’s index of leading economic indicators firmed only 0.1% in December but climbed 1.2% over the second half of 2013.  The index of coincident economic indicators swung from a 0.4% increase in November to a 0.2% drop in the final month of the year.

Swedish consumer confidence unexpectedly sank 2.3% in February.  Overall economic sentiment worsened 2.6%.  At a scheduled meeting in mid-February, the Swedish Riksbank revised projected growth in 2014 to 2.4% from a prior forecast of 2.5%.  The new estimate may also prove too optimistic.  Monetary officials predict CPI inflation of just 0.6% this year, including 0.9% in core CPI.

Icelandic wage cost inflation accelerated to 6.7% in January from 6.0% in December. 

CPI inflation in Hong Kong rose to a six-month high of 4.6% last month from 4.3% in December.

U.S. existing home sales are due today and expected to be lower given recent severe weather that likely deterred house hunting.  Bullard and Fisher, presidents of the St. Louis and Dallas Feds, respectively, speak publicly today.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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