Dollar Uptrend Extended after U.S. Labor Day Weekend

September 2, 2014

The dollar rose to a 1-year high of $1.3110 and a 7-month high of JPY 105.03.  From Monday closing levels, the dollar currently shows gains of 0.6% against the yen and kiwi, 0.5% relative to the Australian dollar and sterling, 0.4% versus the loonie, and 0.1% vis-a-vis the euro and Swiss franc.  The yuan is steady.

Growing signs that the September 18th Scottish independence vote could secure approval weighed on the pound.

The likelihood of more ECB steps to promote inflation and counter deflation lifted equities by 1.2% in Italy, 1.0% in Germany, 0.6% in Spain, 0.5% in France, 0.3% in Switzerland and 0.2% in Great Britain. 

Speculation that pension reform is coming to Japan boosted the Nikkei by 1.2%.  Elsewhere in the Pacific Rim, stocks climbed 1.3% in China but fell 1.2% in Taiwan.  There were gains of 0.6% in India, 0.5% in Australia and 0.4% in Singapore and Indonesia but a drop of 0.8% in South Korea’s Kospi index.

Ten-year sovereign debt yields firmed five basis points in the U.K. and a basis point each in Japan and Germany.

Commodity prices are lower.  Comex gold is down 0.9% to $1,275.70 per ounce.  WTI oil is off 0.8% at $95.22 per barrel.

The Reserve Bank of Australia as expected retained its record low 2.5% Official Cash Rate.  That’s been the OCR level for the past year, before which it was cut by a total of 225 bps beginning in November 2011.  The RBA statement stuck to familiar ground, projecting in-target inflation, calling the policy stance “accommodative,” and advocating an unchanged rate for some time longer as the most prudent course.  The Aussie dollar’s strength was again protested as out of line with economic fundamentals.

Building approvals in Australia rebounded 2.5% on month in July and were 9.4% greater than a year earlier.  Australia’s current account deficit widened 76% on quarter to AUD 13.7 billion in 2Q.  New Zealand commodity export prices fell another 3.3% last month.

Japanese labor cash earnings spiked to a 12-month increase of 2.6% in July from 1.0% in June.  Stronger wage pressure is needed to make the anti-deflation policy sustainable socially.  Japan’s monetary base showed a further deceleration of growth to a 12-month rise of 40.5% in August from 42.7% in July, 45.5% in 2Q and 54.1% in 1Q.

South Korean consumer prices edged up 0.2% on month but decelerated slightly to a 1.4% twelve-month increase.

Britain’s construction purchasing managers index improved to a 7-month high of 64.0 in August from 62.4 in July.

Producer prices in the euro area slid 0.1% in July, powered by a 0.6% drop in energy.  In the 12 months to July, energy producer prices dropped 3.5%, while all other components of the PPI collectively dipped 0.1%, causing the overall PPI to slide by 1.1%.  For the Netherlands (-2.5%), Belgium (-5.7%), and Cyprus (-2.1%), the on-year fall in producer prices was especially big.

Spanish unemployment rose in August by 8.1K, the first increase in a half year but less than forecast. 

Swiss GDP stagnated on quarter in 2Q14, cutting the on-year growth rate to just 0.6% from 2.1% in the first quarter.

In the year to July, Romanian producer prices and retail sales went up by 0.5% and 7.7%, respectively.

Sweden’s current account surplus narrowed 23% on quarter to SEK 48.7 billion in 2Q.

Today sees the release of U.S. and Canadian manufacturing PMI survey results for the month of August.  U.S. construction spending, IBD/TIPP optimism index and NAPM New York regional manufacturing index also arrive.  Service-sector PMIs for Europe and Asia are due tomorrow as is the Fed Beige Book.  Monetary policy meeting decisions will also be announced Wednesday in Brazil, Canada, and Poland.

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

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