Dollar and Euro Charge Upward

January 29, 2015

The dollar edged 0.1% lower against the euro but has advanced 2.0% against the Swiss franc, 1.9% relative to the Aussie dollar, 1.0% vis-a-vis the kiwi, 0.9% against the loonie and 0.7% against the yen and sterling.

The 10-year British gilt slipped four basis points and the 10-year German bund dipped a basis point.  The 10-year U.S. Treasury rose three bps, while Japanese JGBs are unchanged.

Gold sank 1.7% to $1,263.60 per troy ounce.  WTI oil hit a new low for the move and is down 1.0% on balance at $44.00 per barrel.

Share prices in the Pacific Rim fell by 1.2% in China, 1.1% in Japan and Hong Kong, 0.9% in Taiwan, and 0.6% in New Zealand.  The British Ftse, U.S. S&P and German Dax show declines of 0.6%, 0.5% and 0.1%.

The Reserve Bank of New Zealand kept the official cash rate at 3.5% as expected, but in somewhat of a surprise, switched the directionality of the next rate change from a tightening to a neutral bias.  In any case, no rate change is anticipated for some time, and the released statement again called the kiwi overvalued.

The South African Reserve Bank left its policy rate at 5.75% as expected.  Officials would have to see a much more definitive slide in both actual and expected inflation to prompt a rate cut.  The rand has been more stable.

Japanese retail sales fell 0.3% on month in December after a 0.2% decline in November.  This depressed on-year growth is sales to 0.2% from 0.5% in November and 1.4% in both October and the third quarter of 2014.  Large-store retail sales edged up 0.1% between end-2013 and end-2014.

Australian import prices rose by a smaller than expected 0.9% last quarter.  Australia’s indices of leading and coincident economic indicators firmed 0.1% and 0.5% in November. 

New Zealand’s trade deficit totaled NZD 1.15 billion in 2014, more than twice the 499 million kiwi deficit of 2013.  December’s deficit of NZD 159 million reflected a 6.9% on-year drop in exports.

Filipino real GDP growth accelerated to 6.9% on year in the fourth quarter from 5.3% in the previous quarter.  Producer prices in Singapore plunged 9.7% between December 2013 and December 2014.

Turning to Europe, where several data releases arrived,

  • Euroland economic sentiment improved 0.6 points in January to a six-month high of 101.2.  The recent low of 99.9 was hit in September.  Retail sector sentiment and consumer confidence also touched their best levels since last July, but construction and services sector sentiment worsened.  Industrial confidence held broadly stable, as did the overall business climate index.
  • M3 money growth in the euro area accelerated to 3.6% on year last month and averaged 3.1% in 4Q versus 2.1% in 3Q.  Lending to the private sector fell 0.9% in the year to December due mainly to a 1.6% drop in lending to non-financial firms.
  • The Nationwide index of British house prices recorded a smaller 6.8% 12-month rate of increase in January, lowest in 14 months and down from 7.2% in December and 8.5% in November.
  • The Confederation of British Industries’ distributive trades survey registered a 22-point decline to a reading of 39 in January.
  • German harmonized consumer prices dived 1.3% on month and swung below zero in on-year terms to a 12-month decline of 0.5%, most since September 2009.
  • German unemployment fell by nine thousand this month on top of declines of 25K in December and 16K in November.  The unemployment rate hit a new low of 6.5%, and vacancies rose 6K.  There were 1.0% more workers in 4Q14 than in 4Q13.
  • Italian consumer confidence was significantly stronger in January than anticipated, and overall economic confidence rose 4 points to a reading of 91.6.  Wage inflation held steady in December at 1.1%.
  • Austria’s manufacturing purchasing managers index retreated deeper below the 50 no change level to a 3-month low of 48.5 in January.  The last time such was above 50 was in August.
  • Greek producer prices fell 5.7% in the year to December, over twice as much as registered in November. 
  • Spanish consumer prices fell 0.5% on year in January.  Spanish retail sales rose 5.4% in the year to December.
  • Icelandic consumer price inflation held steady at 0.8% in January.
  • Swedish retail sales ended 2014 on a weaker-than-forecast note, falling 0.6% on month and advancing just 3.7% between December 2013 and December 2014.  Swedish consumer confidence weakened in January.
  • Portuguese consumer confidence recovered 0.4 points to –21.9 this month.

U.S. jobless insurance claims dropped by 43K to only 265K last week, which pulled the 4-week average marginally below 300K. 

U.S. pending home sales grew 6.1% on year in December, just half what analysts had been anticipating.

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

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