Stronger Dollar, Weaker Oil Price and a Russian Interest Rate Cut

March 13, 2015

The dollar advanced overnight by 0.9% against the kiwi, 0.6% relative to the Australian dollar, 0.5% versus the Swissie, 0.4% against the euro, loonie and sterling but just 0.1% vis-a-vis the Japanese yen.  The yuan is unchanged.

West Texas Intermediate oil dropped 0.8% to $46.69 per barrel.  Governments by and large had been projected an eventual uptrend in oil and assuming that the massive decline had run out of steam.  Many private forecasters, in contrast, had seen the steadier trend in oil as only a pause and are proclaiming the recent downturn to be the start of a new downleg in energy costs.

Comex gold is 0.3% firmer at $1,155.10 per troy ounce.

The turnaround yesterday in U.S. share prices had selective continuing momentum in Asia, but European markets, where increased tensions between Greece and Germany is a theme, are marginally mixed.  Stocks rose 1.4% in Japan, 0.8% in South Korea, 0.7% in China and 0.4% in New Zealand but fell 0.6% in Australia, 1.5% in India, and 0.3% in Singapore and Indonesia.  Equities are down 0.6% in Greece, 0.2% in Germany and 0.1% in France and Great Britain.

Ten-year sovereign debt yields are up a basis point, unchanged, and down a basis point in Britain, Germany and Japan, respectively.

The Bank of Russia made a second cut in its main interest rate, knocking such down a full percentage point to 14.0%.  The first reduction of 200 basis points announced on January 30 had followed two increases in December totaling 750 basis points.

The Central Reserve Bank of Peru left its key interest rate unchanged at 3.25% but reduced its reserve requirement further, this time to 8.0% from 8.5%.

The U.S. $192 billion February budget deficit in February was close to expectations and followed a shortfall of only $17.5 billion in January.

New Zealand’s manufacturing purchasing managers index rebounded to a 2-month high of 55.9 last month after posting a 6.4-point decline to 50.7 in January.

The rise in Japanese industrial production during January was revised downward to 3.7% from 4.0% reported initially.  Shipments were also revised slightly lower to a gain of 5.6%.  Capacity usage increased 3.6% on month but fell 3.2% on year.  Capacity was 0.7% lower than in January 2014. 

Retail sales in Singapore rebounded 4.8% in January but were 5.0% lower than a year before.  Singapore unemployment ticked down to 1.9% in the final quarter of 2014 from a reading of 2.0% in the three other quarters of the year.  The jobless rate had averaged 1.8% in 4Q13.

The 12-month rate of decline in South Korean import prices narrowed to 17.8% in February from 19.4%.  Exports prices were 1.4% higher than a year before.  A Korean interest rate cut on March 12 was in part a response to won strength against the yen.

Industrial production in Hong Kong fell 3.7% between the final quarters of 2013 and 2014.  Producer prices in the former British colony were 1.2% higher over the same span.

German wholesale prices posted their first monthly increase in five month, a gain of 0.5% in February that cut the size of the 12-month decline to 2.1% from 2.6%.  Wholesale costs of mineral oil and fuel products advanced 2.7% on month but fell 15.7% on year.

British construction output plunged 2.6% on month in January, swinging the on-year change to a drop of 3.1% from a rise of 5.3% in the year to December.

Greek import prices recorded declines in January of 1.9% from December and 13.2% from a year earlier.

Italian consumer price inflation dipped to minus 0.1% in February after being zero in December and January.

Finnish consumer prices also slid 0.1% in the 12-months to February.  Finland’s current account surplus of EUR 530 million in January was 74% wider than the combined surpluses in November and December.

Retail sales and industrial production in the Czech Republic increased 2.0% and 0.4% on month in January.

The U.S. releases the PPI index and the U. Michigan/Reuters gauge of consumer sentiment today.  Canadian labor statistics arrive.

Next week will be dominated by the FOMC statement and press conference on Wednesday.  There are also central bank meetings scheduled in Japan, Indonesia, Norway, Iceland, Switzerland, Turkey and Chile.

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

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