Aussie Dollar Lifted by Higher-than-Forecast CPI

July 23, 2014

Australian consumer prices climbed 0.5% on quarter and to a nine-quarter high of 3.0% on year, which coincides with the 2-3% target ceiling.  The trimmed mean measure of core CPI inflation rose to 2.9% from 2.6% in the first quarter and final quarter of 2013.  There seems little chance of a further monetary policy easing, and the Aussie dollar in response rose 0.6% to a two-week high against its U.S. counterpart.

The greenback otherwise slid 0.2% versus the kiwi and 0.1% against the yuan, yen, and loonie.  The dollar is unchanged relative to the euro and Swiss franc and 0.1% firmer against sterling.

Minutes from the Bank of England MPC meeting earlier in July revealed no dissenting votes in favor of tightening monetary policy.  However, the minutes express a view that risks are “receding” that an interest rate hike might jeopardize the economic recovery.  Growth in 1H14 surpassed trend, and Britain’s output gap is shrinking.

Bank of Japan Deputy Governor Nakaso in a speech defended the status quo policy settings, observed firm domestic demand, noted a side-ways trend in exports, asserted progress continues to be made in eradicating deflation but called talk of ending QQE premature.

Share prices rose 0.8% in Hong Kong, 0.7% in Singapore, 0.6% in Australia and Taiwan, 0.5% in India, 0.3% in New Zealand and 0.2% in China and Indonesia.  Japan’s Nikkei dipped 0.1%.  Equities in European markets have risen 0.6% in Germany, 0.5% in France, and 0.3% in Britain and Spain. 

The ten-year British gilt yield slipped two basis points, while its Japanese and German counterparts held steady.

WTI oil is unchanged at $102.42 per barrel. Gold is up 0.2% at $1,310.40 per ounce.

French manufacturing sentiment stayed level at 97 in July following 2-point declines in both May and June.

The euro area’s government deficit-to-GDP ratio ticked up to 2.7% in the first quarter from 2.6% in 4Q13 but remained well below the 3% threshold which had been observed earlier in 2013.

The British distributive trades survey index rebounded to a better-than-forecast July reading of 21 after dropping to 4 in June from 16 in May and 30 in April.

According to British Bankers Association data, U.K. mortgage applications increased 3.3% in June to a three-month high of 43,265.

Dutch household spending edged up 0.1% on year in May following negative readings earlier in 2014.

Polish retail sales fell 1.1% in June, trimming the 12-month rate of increase to just 1.2% from 3.8% in May and 8.4% in April.  Poland had a 12.0% jobless rate in June.  Danish consumer sentiment improved 1.3 points to a reading of 10.6 in July.

Several economies reported price data. Singaporean producer price inflation slowed in June to 1.8% from 2.7% in May, thanks to a 0.7% monthly drop. Icelandic CPI inflation edged back up to May’s 2.4% in July after dipping to 2.2% in June.  Icelandic producer prices were 1.8% lower in June than a year earlier, but wage inflation accelerated further to 5.4%.  South Africa’s 6.6% CPI inflation rate in June was the same as in May.  Irish producer prices fell 1.7% on year in June.

Canadian retail sales figures get reported today.  U.S. officials maintain that the missile that brought down the Malaysian airplane was Russian built.

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

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