Euro Weakens Further in Post-Draghi Reaction
May 9, 2014
The takeaway from yesterday’s ECB press conference is that it’s a matter of what kind of stimulus the ECB will announce next month, rather than whether something is going to be introduced then. A big part of this preparation stems from mounting frustration with the euro’s prior appreciation and how the currency’s strength could promote sub-target expected inflation.
The euro fell 0.4% overnight. The dollar is also up 0.5% against the Swiss franc, 0.3% versus sterling, 0.2% relative to the yen and 0.1% vis-a-vis the Australian dollar. The loonie, kiwi and yuan are unchanged overnight.
Share prices rose 2.9% in India, 0.8% in Japan, and 0.3% in South Korea but are down 0.3% in Taiwan and Australia, 0.2% in New Zealand and 0.1% in China. In Europe where earnings news has been a bit disappointing, equities have fallen 1.2% in Italy, 1.0% in Spain, 0.6% in France, 0.3% in Britain and Germany and 0.1% in Switzerland.
The 10-year British gilt yield rose two basis points, while Japanese JGBs and German bunds are unchanged.
Gold rose 0.2% to $1,290.60 per ounce. West Texas Intermediate oil prices advanced 0.4% to $100.65 per barrel.
The Bank of Korea’s seven-day repo rate was kept once again at 2.5%, its level since a 25-basis point cut in May 2013.
The Central Reserve Bank of Peru’s reference interest rate was left at 4.0%, the level since a 25-basis point cut a half year ago. Growth has been somewhat slower than hoped and remains slower than Peru’s potential GDP expansion rate, whereas inflation is running a bit above target. Like the case in South Korea, analysts were not expecting a Peruvian interest rate change this month.
The Reserve Bank of Australia published its quarterly Monetary Policy Statement. The dovish tone of the report suggests no hurry to lift the record low 2.5% Official Cash Rate. The corridor of projected growth in fiscal 2015 was revised downward to a quarter of a percentage point.
British industrial production slipped back 0.1% in March after increasing 0.7% in January and 0.8% in February. The first quarter saw an average quarterly advance of 0.7% and an on-year 2.5% rate of increase. Factory output rose 0.5% on month and 3.3% on year in March.
Britain’s good and services trade deficit narrowed to just GBP 1.284 billion in March, less than the GBP 1.96 billion per month deficit in January-February. The merchandise trade gap of GBP 8.478 billion in March was similarly smaller than the average deficit of GBP 9.11 billion in January and February.
The German current account surplus snapped back to EUR 19.5 billion in March from EUR 13.8 billion in February but was smaller than the year-earlier surplus of EUR 21.1 billion. The seasonally adjusted trade surplus, in contrast, narrowed to EUR 14.9 billion from February’s EUR 15.8 billion and January’s EUR 17.3 billion. Exports fell 1.8% on month and were just 1.9% higher than in March 2013.
Japan’s index of leading economic indicators sank further to a reading of 106.5 in March from 108.7 in February and 113.3 in January. But the index of coincident economic indicators rose a bit more than a point, so officials retained the label that the trend is “improving,” which has been the designation for the past nine months.
Japanese international reserves rebounded $3.476 billion in April from an $8.86 billion drop in March and were $24.9 billion greater than in April 2013.
Japan’s April 1-20 customs trade deficit narrowed 30% on year to JPY 526 billion, thanks to export growth of 2.8% and a 2.7% drop in imports.
Chinese CPI inflation of 1.8% in the year to April was down sharply from 2.4% in March and the smallest 12-month rate of increase since October 2012. Producer prices fell 2.0% between April 2013 and April 2014. There have been uninterrupted 12-month drops posted since March 2012.
Finnish, Dutch, Italian and Greek industrial output fell 5%, 3.8%, 0.4% and 3.1%, respectively, between March 2013 and March 2014.
Norwegian CPI inflation edged down 0.2 percentage points to 1.8% in April, while producer prices dropped 0.6% over the 12 months to April. Greek CPI inflation stayed negative at minus 1.3% in April (and -1.6% in harmonized terms).
Denmark’s current account deficit narrowed 12.8% on month to DKK 3.9 billion in March. The Portuguese trade gap of EUR 2.6 billion in March was 4.1% smaller than in February.
Canadian monthly labor statistics get reported today. The U.S. JOLTS index of job hires and separations is due, as are wholesale inventories. So are Brazilian consumer prices and Mexican trade numbers. Minneapolis Fed President Kocherlakota speaks publicly.
Copyright 2014, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British industrial production, Draghi, German current account
ShareThis
