Sharp Overnight Drop in the Pound

September 8, 2014

Sterling has slumped 1.3% against the dollar in response to opinion polls pointing to a vote in favor of Scottish independence in a referendum scheduled for September 18.

The U.S. currency is otherwise unchanged against the euro and yuan but up 0.3% relative to the Australian dollar, 0.2% versus the loonie and kiwi and 0.1% vis-a-vis the Swiss franc and yen.

Share prices advanced by 1.1% in India, 1.0% in China, 0.2% in Japan and New Zealand, and 0.6% in Indonesia but lost 0.3% in South Korea and show losses so far today of 0.9% in the U.K., 0.5% in Spain, 0.3% in Italy and France and 0.1% in Germany.

The ten-year German bund yield edged one basis point higher, while the 10-year gilt is a basis point lower.

West Texas Intermediate oil has declined 0.8% to $92.58 per barrel, and Comex gold is steady at $1,267.50 per ounce.

For the second month in a row, China reported a record high trade surplus, this time of $49.8 billion.  The July-August surplus totaled a whopping $97.1 billion compared to a monthly average surplus of $17.1 billion in the first half of 2014.  Chinese exports were 9.4% greater in August than a year earlier, whereas imports dropped by 2.4%.

German exports rose to a record high of EUR 101 billion in July.  The seasonally adjusted trade surplus, amounting to EUR 22.1 billion, was 34.8% wider than in June and 31.9% larger than the first-half average.  Germany’s current account surplus in July rose to EUR 21.7 billion from EUR 17.2 billion in June and EUR 12.3 billion in July 2013.

Five Japanese economic indicators were reported.

  • The 2Q contraction of real GDP was revised to 7.1% at an annualized rate from 6.8% reported a month ago.  The main downward revision involved non-residential business investment, now estimated to have slumped 18.8% annualized.  Personal consumption dropped 19.0% in the quarter and depressed GDP growth by 12.6 percentage points.  Net foreign demand and unplanned inventory accumulation augmented growth by a combined 9.8 percentage points.  The GDP price deflator was 2.0% higher in 2Q than a year earlier.
  • Japan’s economy watchers index sank 4.2 points to a reading of 47.1 in August, a three month low.  Analysts were not expected a drop.
  • Bank lending grew 2.2% on year in July, same as in June and the first half of 2014.
  • There were 11.2% fewer bankruptcies in August than a year earlier.
  • The seasonally adjusted current account surplus narrowed to a four-month low of JPY 99 billion in July from JPY 126 billion in June.  The unadjusted current account surplus of JPY 417 billion was 30.5% smaller than the surplus in July 2013.  Stock and bond transactions in the month generated a JPY 3.28 trillion net capital outflow.

The Bank of France is predicting a 0.2% rise of French GDP this quarter after announcing a one-point improvement to 97 in France’s industrial business sentiment index in August.  Sentiment in services also went up a point.

German labor costs climbed 1.7% on year adjusted for working day variations during 2Q14.  That gain follows those of 0.5% in the first quarter and 1.2% in the final quarter of 2013.

Swiss seasonally adjusted unemployment stayed at 3.2% in August.  Swiss consumer prices stagnated on month in August and were just 0.1% higher than a year earlier.  Swiss retail sales posted declines in July of 3.4% from June and 0.6% from July 2013.

The euro area Sentix measure of investor sentiment toward the region deteriorated 12.5 points to post a negative reading, -9.8 in September, for the first time since August 2013 and the worst reading in 14 months.

The British Halifax home price index decelerated to an on-year rise of 9.7% in June-August from 10.2% in May-July.  This price index was 0.1% higher in August than July.

Ireland’s construction PMI fell 1.2 points to 61.4 in August but was higher than any of the readings in the first half of 2014.

Australian job ads increased 1.8% in August, their third monthly rise in a row.  The volume of New Zealand industrial sales fell by 0.7% last quarter after a 0.2% uptick in 1Q.

Turkish industrial production climbed 1.8% on month and showed accelerated on-year growth of 3.6% in July.  Czech industrial output advanced 8.6% between July 2013 and July 2014.  The Czech trade surplus in July of CZK 11.5 billion was 38% smaller than in June.  Denmark’s DKK 6.0 billion trade surplus was only marginally down from DKK 6.0 billion posted in June.

U.S. consumer credit and Canadian building permits will be reported today.

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

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