Steady Dollar as Ezone CPI Report Reinforces Need for ECB Easing

June 3, 2014

The dollar is unchanged against the yen, kiwi and sterling, up by 0.2% versus the loonie and 0.1% relative to the yuan, and down 0.1% overnight relative to the euro, Swiss franc and Australian dollar.

Share prices climbed 0.7% in Japan and India, 0.9% in Hong Kong, 0.6% in Indonesia, 0.5% in Taiwan, and 0.3% in South Korea but fell by 0.7% in Australia and 0.3% in China and New Zealand.

The 10-year British gilt yield advanced five basis points, while those for German bunds and Japanese JGBs are unchanged.

Gold edged up 0.2% to $1,246.00 per ounce, and WTI oil dipped 0.1% to $102.33 per barrel.

CPI inflation in the euro area sank 0.2 percentage points in May to 0.5%.  This matches the 4-year low in March and compares to 1.4% in May 2013.  Core CPI of 0.7% was down from 1.0% in April and 1.2% a year earlier.  The most pronounced disinflation has been in food, up 0.1% on year after a rise of 3.2% in the prior statement year to May 2013.

Euroland unemployment ticked down 0.1 of a percentage point to 11.7% in April.  Such had been 11.8% in each month of 1Q and at 12.0% in April 2013.  Women and young workers shared in the improvement, but not men whose jobless rate stayed at 11.7%.

The Reserve Bank of Australia Board retained the central bank’s Official Cash Rate of 2.5%, a record low, calling such accommodative and appropriate and recommending a “period of rate stability” as the most prudent course of action.

The Reserve Bank of India cut the statuatory liquidity ratio to 22.5% from 23.0% as a step to promote liquidity but left the key repo and reverse repo rates at 8% and 7%, respectively.  Disinflation is now happening in response to interest rate hikes undertaken in the past year, and officials suggested that should inflation fall more quickly than assumed, the key interest rates may have maneuvering room to be lowered.

Non-oil purchasing manager survey results were reported for Egypt, Saudi Arabia and the United Arab Emirates

  • Egypt’s index dropped 0.8 points to a 4-month low of 48.7 in May.  Such has been lower than the 50 neutral threshold for 3 consecutive months and four of the past five months.
  • The Saudi index settled back from 58.5 in April to match the March reading of 57.0.  Orders grew at their slowest rate in 32 months.
  • The U.A.E. index fell to a 3-month low of 57.3 from April’s record peak of 58.3.

The Irish manufacturing PMI fell 0.9 points to a 3-month low of 55.0, but jobs expanded at their fastest pace since Y2K.

Taiwan’s manufacturing PMI edged 0.1 higher to 52.4 and was above 50 for a ninth straight time.

Mixed Chinese PMI data were released.  The revised HSBC manufacturing purchasing managers index was less than 50 for a fifth straight time.  It was revised down from a preliminary indication of 49.7 to 49.4.  But the government’s non-manufacturing PMI printed at 55.5, a six-month high and up from 54.8 in April.

Britain’s construction PMI index fell to a 7-month low but, at 60.0, signaled buoyant activity.  The U.K. Nationwide house price index recorded a 0.7% monthly advance in May and accelerated in on-year terms to 11.1% from 10.9% in the year to April.

Australia posted a smaller-than-expected current account deficit of A$ 5.672 billion in 1Q, the lowest deficit since 3Q11.  There was a deficit of A$ 11.706 billion in the fourth quarter of 2013 and of A$ 8.740 billion in the first quarter of 2013. 

Australian retail sales rose 0.2% in April following just a 0.1% uptick, the smallest in 8 months, recorded in March.  Sales were 6.0% greater than in April 2013.

Japanese labor cash earnings, a gauge of wage inflation, hit a 2-year high in April, albeit just 0.9% versus 0.7% in March.  Growth in Japan’s monetary base continues to slow, rising 45.6% in the year to May after on-year growth of 48.5% in April, 54.1% in 1Q, and 54.4% in 2013.

Turkish CPI inflation picked up to 9.7% in May from 9.4% in April.  PPI inflation decelerated to 11.3% from 13.0%.

New Zealand’s terms of trade increased just 1.8% in 1Q14, the weakest pace since 4Q12.  The statement accompanying the Reserve Bank of Australia’s decision not to change the official cash rate said that the further decline of commodity export prices warranted further depreciation in the Australian dollar.

Scheduled U.S. data to be released today include factory orders, the IBD/TIPP optimism index, the NAPM index of manufacturing in the New York area, and weekly chain store sales.  This week’s big event will be the ECB press conference, now less than 50 hours away.

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

Tags: , , ,


Comments are closed.