Steady Dollar in Spite of Lots of Developments

July 15, 2014

The dollar is unchanged against the euro, yen, yuan and Swiss franc.  The greenback has risen 0.2% versis the Aussie dollar and 0.1% relative to the loonie but has also declined 0.4% against sterling.

Stocks rose somewhat in the Pacific Rim but are lower in Europe.  Equities advanced 1.0% in Indonesia, 0.9% in India and South Korea, 0.5% in Hong Kong and Taiwan and 0.6% in Japan.  Share prices so far are down 0.7% in Spain, 0.4% in Italy and 0.1% in France and Germany.  The British Ftse has ticked up 0.1%.

The ten-year British gilt yield rose three basis points to 2.63%, goosed by higher-than-forecast British CPI data and Bank of England Governor Carey’s parliamentary testimony.  Ten-year German bunds and Japanese JGBs are unchanged.

WTI oil, down 0.7% at $100.17 per barrel, and Comex gold, up 0.3% at $1,310.90 per ounce, moved in opposite directions overnight.

The Bank of Japan did not change its policy settings or its year-old economic assessment.  New quarterly macroeconomic forecasts for the coming three fiscal years were released.  Projected growth for the year to March 2015 was bumped down 0.1 of a percentage point to 1.0%, but no other revisions were made.  Governor Kuroda complained that the yen should be weaker going forward, and he expressed strong confidence that core inflation would not dip back under 1%.

Bank of England Govenor Carney said markets do not seem to be appropriately discounting the risk of an interest rate hike this year.  He warned that no explicit guidance will be given to the timing of the first increase, which like all policy decisions will be data driven.

U.K. CPI inflation bounced from 1.5% in May to 1.9% in June and was accompanied by a 0.4 percentage point rise in core CPI to 2.0%.  RPIX inflation rose to 2.7% from 2.5%.  In the year to June, producer output prices rose 0.2%, and producer input prices fell by 4.4%, but the ONS gauge of home price inflation accelerated a full percentage point to 10.5% from 9.5% in the year to May.

Minutes from the Reserve Bank of Australia’s policy meeting earlier this month confirmed that leaving policy unchanged is prudent and appropriate because of benign in-target inflation, sub-trend economic growth, excessive Aussie dollar strength, but also considerable monetary stimulus that is already in place.

Fed Chair Janet Yellen presents Humphrey-Hawkins testimony before the Senate Banking Committee at 14:00 GMT today.  Such will cover the state of the economy and guidance on monetary policy.  President Obama also speaks on the economy today.

More Chinese data were released today.  Bank lending and the money supply expanded faster than forecast last month, but foreign direct investment posted the smallest year-to-date advance, just 2.2%, in a year.  Bank loans of 1.08 trillion yuan was the largest increase since January.  In the year to June, M2, M1, and M0 went up by 14.7% (most since August 2013), 8.9% (up from 5.7%) and 5.3% (down from 6.7%).

The ZEW Institute’s July measures of investor confidence and perceptions were reported for Germany and the euro area. Regarding Germany, expectations printed at 27.1, down from 29.8 in June, 33.1 in May and 62.0 last December.  Current conditions had a reading of negative 31.5 after -27.7 in June.  Regarding Euroland, expectations dropped 10.3 points to 48.1 in July, and conditions worsened by 3.8 points to -31.5.

The Swiss PPI/import price index stagnated in June versus May and was 0.8% lower than in June 2013.  Domestic producer prices fell 0.5% on year.

Same-store sales in the U.K. fell 0.8% on year in June.  Analysts had predicted a rise of around that amount.

Australian motor vehicle sales were 2.2% lower than a year earlier in June despite a 1.7% monthly advance.

Retail sales in Singapore sank 6% on year in May. 

Turkish unemployment remained at 9.1% in April.

Spain’s index of leading economic indicators went up 0.4% in May, twice as much as the index of coincident economic indicators.

U.S. data arriving today include the Empire State manufacturing index, retail sales, import and export prices, and weekly chain store sales.  Chinese GDP is due Wednesday along with monthly retail sales and industrial production.  The main event today will be Yellen’s aforementioned testimony.

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


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