New Highs for the Dollar

January 5, 2015

Fresh U.S. dollar highs for the move were set overnight of 1.1867 per euro, 1.5178 per pound, 0.8035 per AUD, CHF 1.0295 and C$ 1.1845.  The U.S. currency is currently below its overnight peaks but retains gains from Friday’s closing of 0.8% against the euro, 0.7% versus the Swiss franc, 0.6% relative to sterling, 0.4% vis-a-vis the Australian and New Zealand dollars, 0.3% against the yuan and 0.2% versus the loonie.  Against the yen, however, the dollar has eased 0.2% on nt.

Preliminary German CPI indications confirm a very sharp further decline of inflation, hastening the urgency for significant additional ECB stimulus.  A change in the Governing Council’s meeting schedule means that announcement of such will not happen in the first week of 2015 as would previously been the case.  On-year German CPI inflation fell by 0.7 percentage points (ppts) to zero in North Rhine Westphalia, by 0.5 ppts in Bavaria to 0.3%, by 0.4 ppts to 0.3% in Brandenburg, by 0.4 ppts to 0.1% in Baden-Wuerttemberg, by 0.5 ppts to zero in Hesse, and by 0.2 ppts to 0.5% in Saxony.

Fear of Grexit (Greece leaving the European Economic and Monetary Union) remains elevated.  German Chancellor Merkel is said to be resigned to such an outcome if Greek voters select a government opposed to fiscal rigor.

Turkey’s central bank raised reserve requirements on foreign currency-denominated deposits to 12.8% from 11.7%.

European share prices are down by 1.5% in Italy, 1.1% in Spain, 0.8% in France and Britain and 0.5% in Germany.  In contrast, China’s stock market climbed 3.1%, and those of Australia and New Zealand rose 0.6% and 0.3%.  But equities slid 0.6% in Hong Kong and South Korea and by 0.2% in Japan and India.

West Texas Intermediate oil plunged 1.8% to a 5-year low of 51.76 per barrel.  Comex gold is 0.3% firmer at $1,190.00 per ounce.

10-year sovereign debt yields rose three basis points in the U.K. and a basis point in Germany but remained unchanged at 0.31% in Japan.

The Sentix measure of investor confidence in the euro area unexpectedly posted a third consecutive improvement, rising to a 5-month high of 0.9 in January from -2.5 in December, -11.9 in November and -13.7 in October.

Among reported purchasing managers survey results reported overnight,

  • Japan’s factory PMI remained at 52.0 in December and averaged 52.1 in 4Q after a mean of 51.5 in 3Q.  Input price inflation was at an 11-month high.
  • The Vietnamese manufacturing PMI climbed 0.6 points to an 8-month high of 52.7 and also reflected lessening inflation.
  • Taiwan’s manufacturing PMI dropped 1.4 points to the 50.0 no-change threshold, marking the weakest result in 16 months.
  • Australia’s manufacturing PMI fell 3.2 points to a 3-month low of 46.9 in December.
  • Hungary’s manufacturing PMI plunged 4.8 points to 50.7.  Such had averaged 55.2 in October-November.
  • The Swiss manufacturing PMI rebounded 1.9 points to a 2-month high of 54.0 last month.
  • Britain’s construction PMI sank 1.8 points to a 17-month low but at 57.6 still indicated pretty strong growth.

Spanish unemployment fell 64.4K last month and by 254K in 2014, most for any calendar year since 1998, the year before the euro was born.

Portuguese business sentiment slid marginally to a reading of 0.3 in December, while consumer confidence stayed very weak at minus 22.3.

Turkish CPI inflation slowed to 8.2% in December from 9.2% in November, while PPI inflation decelerated to 6.4% from 8.4%.  Cypriot consumer prices fell 0.2% on month and by a considerably steeper 1.5% on year in December.  Thai CPI inflation was halved last month to 0.6% from 1.3% in November, while the rate of decline in Thai producer prices doubled to 3.6% from 1.7%.

Motor vehicle sales in Japan posted a sixth straight on-year decline in December, this time of 8.8% after -13.5% in the year to November.

Data to be released in the United States include auto sales and the New York regional PMI, known as the NAPM index.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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