Australian Dollar Softens on Plunge in Exports to China

July 2, 2014

The U.S. currency climbed 0.4% against the Australian dollar but is otherwise hardly changed overnight.

Australian exports dropped 4.6% in May, thanks to a 12% plunge in shipments to China.  Aussie imports were 0.6% lower on month, and the trade deficit of 1.9 Aussie dollars was the largest shortfall since November 2012.  April had experienced a deficit of A$ 780 million.  The yuan’s fixing against the dollar was the lowest in two weeks.

More good British news enabled sterling to touch a six-year high of $1.7179.

  • Britain’s construction purchasing managers index rebounded 2.6 points to a 4-month high of 62.6 in June.  Every reading so far in 2014 has been 60.0 or better.
  • The Nationwide index of British home prices rose 1.0% on month in June, twice analyst expectations, and accelerated to an 11.8% 12-month rate of increase.  The index is now higher than its cresting point in 2007.

Following the strong North American performance of stocks on July 1, share prices in the Pacific Rim climbed 1.6% in Hong Kong to a 7-month high, 1.5% in Australia, 1.3% in India, 0.7% in Singapore, 0.5% in Indonesia and 0.3% in Japan and China.  Equities show gains so far today of 0.9% in Italy, 0.3% in Britain and Switzerland, and 0.2% in Germany, but they are unchanged in Spain and France.

The ten-year German bund yield edged up a basis point, and the 10-year British gild dipped a basis point.  The Japanese JGB is unchanged.

WTI oil slipped 0.3% to $104.99 per barrel.  Comex gold edged up 0.1% to $1,327.90 per ounce.

Late yesterday came word of a 2-percentage point cut in the National Bank of Romania’s reserve requirement on foreign currency deposits to 16%, but the key lending rate was left at 3.5%.  Romanian GDP rose 0.2% on quarter and 4.0% on year in 1Q.  In the year to May, retail sales jumped 10.2%, while producer prices only advanced by 0.8%.

Today, Poland’s central bank will announce its latest interest rate decision

Producer prices in the euro area slid 0.1% in May and recorded a 1.0% year-over-year decline.  The PPI in April-May was 0.4% below the 1Q average level.

The global purchasing managers index in manufacturing, which is compiled by JP Morgan, improved 0.6 points to a reading of 52.7 in June.  The CEO of that bank was diagnosed with treatable throat cancer.

In the United States today, the focus will be on a speech by Federal Reserve Chairwoman Yellen and the release of three economic indicators: the ADP estimate of private employment, monthly factory orders, and the New York NAPM purchasing managers index.  Because of Friday’s closure for Independence Day, the Labor Department tomorrow will release its monthly labor statistics as well as weekly jobless insurance claims.

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

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