Japanese CPI, German IFO and Russian Rate Hike Fail to Move Dollar Much

July 25, 2014

The dollar is unchanged against the yuan and sterling and firmer by 0.3% relative to the kiwi, 0.2% versus the loonie, and 0.1% against the euro, Swissie, Australian dollar and yen.

Share prices rose 1.1% in Japan and China, 0.4% in New Zealand and South Korea, and 0.3% in Hong Kong, but they have fallen in Taiwan by 0.9% and India in 0.6%.   European markets also lost ground, with the Paris Cac off 0.7%, the German Dax and Spanish Ibex off 0.5%, and stocks in Britain and Italy edging 0.1% lower.

Ten-year Japanese JGB, German bund and British gilt yields each dipped a basis pint.

Comex gold is 0.4% firmer but still below the $1,300 threshold at $1,297.60 per ounce.  WTI oil nudged 0.1% higher to $102.15 per barrel.

As Bank of Japan officials had anticipated, on-year CPI inflation was somewhat lower in June than in May.  But declines in total CPI inflation to 3.6% from 3.7%, in CPI ex-fresh food to 3.3% from 3.4%, and in the CPI ex-fresh food and energy to 2.3% from 2.7% were less than forecast.  Tokyo consumer prices in seasonally adjusted terms were unchanged for a second straight time in July.  Japanese corporate service prices rose 0.1% on month in June, leaving the 12-month rate of increase unchanged at 3.6%.

The German IFO Institute’s gauge of that economy’s business climate suffered a 1.7-point setback to a nine-month low of 108.0 in July.  Current conditions fell 1.9 points to a six-month low of 112.9, while expectations dropped 1.4 points to a 13-month low of 103.4.  The readings for manufacturing, wholesaling and retail were the weakest since October 2013, while that for construction was the lowest since last September.  Geopolitical tension was largest blamed for the results.  The IFO services index tumbled 2.7 points to a two month low even though expectations improved slightly.

Russia’s central bank lifted the one-week auction interest rate by 50 basis points to 8.0%.  This follows increases of 50 bps in April and 150 bps in March.  Today’s move had not been predicted but was engineered to support Russia’s exchange rate and limit the inflationary pass-through of prior depreciation. 

In other geopolitical news,

  • The Obama administration accused Russia of firing from its own territory on Ukrainian military installations.
  • “Lunatic” rebels at the Flight 17 crash site continue to impede that investigation.
  • There’s still been no cease-fire negotiated in Gaza as the death toll there surpassed 800.

Japanese stock and bond transactions last week generated a net JPY 310 billion capital inflow after an outflow of JPY 915 billion in the prior week.

Business sentiment in New Zealand fell 3.1 points to 39.7 in July.  South Korean consumer confidence fell 2 points to 105 in July.  Industrial production in Singapore dipped 0.1% in June and was just 0.4% higher than a year earlier.

The first estimate of British GDP growth in the second quarter came in pretty much as expected.  GDP matched the first quarter’s 0.8% gain and exceeded the pre-Great Recession level for the first time.  On-year growth edged up to 3.1% from 3.0% in 1Q.

The British Hometrack house price index edged up 0.1% on month and decelerated in year-over-year terms to 5.8% in July from 6.0% in June.

Italian wage inflation edged down to 1.2% in June from 1.3% in May.

German consumer confidence ticked up from 8.9 in July to a 92-month high of 9.0 in August.

Euroland’s index of leading economic indicators rose just 0.1% last month, and the index of coincident economic indicators stagnated for a second month in a row.

Euro area money and credit growth figures also got released.  M3 money growth accelerated to 1.5% in June.  M3 in 2Q was 1.1% greater than a year earlier.  Loans to the private sector fell by a smaller 1.7% on year in June. 

Swedish retail sales rebounded 0.5% in June, lifting the 12-month increase to 3.3% from 3.0%.  Sweden’s trade balance swung to a SEK 5.2 billion surplus in June from a 0.2 billion kronor deficit in May, thanks to a 4.3% plunge in imports.  The Greek trade deficit of EUR 1.17 billion in May was marginally smaller than the gap in April.

Danish retail sales fell 0.6% on month and 0.8% on year in June.  Spanish PPI inflation was at 0.4% last month.

U.S. durable goods orders will be reported today.  An interest rate decision is awaited in Colombia.

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

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