A Weaker Euro but a Stronger Yen

January 14, 2015

The euro fell to a nine-year low of $1.1727.  The yen, in contrast, climbed as high as 116.64 per dollar and 137.0 per euro and is at present 0.8% above Tuesday’s closing level against the U.S. currency.  The dollar otherwise has risen 0.6% against the kiwi, 0.5% versus the Australian dollar, 0.2% vis-a-vis the loonie and 0.1% against the euro and Swiss franc on balance but shows a drop of 0.2% versus sterling.  The yuan is steady.

Led by a plunge of more than 5% in copper, commodity prices are broadly lower.  West Texas Intermediate oil has fallen 0.6%, and Comex gold is 0.5% weaker at $1,228.60 per troy ounce.

Ten-year British gilt and German bund yields slipped by two basis points apiece, and the 10-year JGB yield softened a basis point to 0.25%, a record low.

Equities in the Pacific Rim mostly fell, with losses of 1.7% in Japan (as the Nikkei dropped below 17K again), 1.1% in Indonesia, 1.0% in Australia, 0.6% in Taiwan, 0.5% in Singapore, 0.4% in Hong Kong, 0.3% in India, and 0.3% in China.  The British Ftse slumped 1.6%, and stocks in Italy, France, and Switzerland have traded 0.2% lower.  The German Dax and Spanish Ibex are unchanged on the day.

The EU Court of Justice gave sovereign bond buying by the ECB its stamp of approval provided the amount done is no greater than needed.

The World Bank released its semi-annual growth forecast, revising such lower.  The WB now projects global growth of 3.0% this year followed by 3.3% in 2016, and this will be led by projected growth of 7.1% in China, 6.4% in India and 3.2% in the U.S. during 2015.  By comparison, the 2015 growth estimates for Japan and the euro area are just 1.2% and 1.1%.

Japanese M2 money expanded 3.6% on year in December, 3.4% in 4Q14 and also 3.4%  in calendar 2014.  M2 had slowed to 3.0% in 3Q but was 3.6% in 2013.

Japanese machine tool orders were 33.8% greater in December than a year earlier.  That was down from a 36.6% pace in November.

Industrial production in the euro area recorded a third straight monthly rise in November, this time of 0.2% versus expectations of no change.  Output was still 0.4% less than in November 2013, but production in October-November was on average 0.3% above the 3Q level.  A 1.9% jump in consumer durables in November outweighed a 0.9% decline in energy production.

New Zealand house price inflation of 4.9% in December was the slowest on-year pace in 28 months.  Australian job vacancies increased 2.6% in September-November.

Indian wholesale price inflation was only 0.1% in December.  That was marginally above November’s pace but down from 1.7% in October.

South African retail sales growth accelerated in November to a monthly advance of 1.5% and an on-year rise of 3.6%.

Back in Europe, France’s CPI edged up 0.1% last month and was higher than a year earlier by 0.1% as well. Italian consumer prices were unchanged last month from November and also unchanged from end-2013.  Greek import prices posted a larger 7.8% 12-month rate of decline in November.  Consumer prices in Hungary fell 0.9% in the year to December, while those in Finland rose 0.5%. 

The French current account swung to a EUR 0.2 billion surplus in November from a EUR 0.4 billion deficit in October, and Finnish retail sales plunged 4.2% between November 2013 and November 2014.  Romanian and Hungarian industrial production advanced by 2.8% and 5.8% in the year to November.

The Conference Board reported back-to-back drops of 0.3% in Britain’s index of leading economic indicators during October and November.  The index of coincident British economic indicators rose 0.2% in the latter month.

Retail sales in Brazil increased 0.9% on month and 1.0% on year in November.

Minneapolis Fed President Kocherlakota urged Congress not to impose a rule-based monetary policy on the FOMC, advocating the current goal-based approach instead. 

U.S. retail sales and import price data will be released shortly.  Later today, the Fed Beige Book of regional economic conditions will be reported.

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

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