Weaker Pound and Dollar

March 24, 2015

The dollar advanced 0.4% relative to sterling but is otherwise down by 0.8% against the Swiss franc, 0.3% versus the yen and loonie, 0.2% vis-a-vis the euro and Australian dollar and 0.1% against the kiwi and yuan.

Preliminary purchasing manager surveys for March, based upon roughly 85% of the information in the final tallies, were released for Japan, China, the eurozone, Germany and France.  Improvement in the Eurozone exceeded expectations, further affirming the initial confidence boost from ECB quantitative easing.  The Chinese and Japanese reports showed deterioration.

The ten-year Japanese JGB, German bund and British gilt yields are respectively up a basis point, unchanged and down a basis point.

Share prices in the Pacific Rim fell 0.3% in Taiwan, 0.4% in Hong Kong, and 0.1% in India and New Zealand.  Small gains were made in Australia, South Korea, Indonesia and Singapore, while Chinese equities were unchanged.  In European bourses, stocks jumped so far by 2.1% in Athens and 0.7% in Milan.  The German Dax is down 0.2%, responding in part to news that a German aircraft with about 150 people on board crashed in Southern France.  No survivors are expected.  Equities are up 0.1% in Great Britain and France and by 0.3% in Spain.

West Texas Intermediate oil rose 0.7% to $47.79 per barrel.  Comex gold is 0.4% stronger and close to $1,200 at $1,192.80 per troy ounce.

The composite eurozone purchasing managers index rose 0.8 points to a 46-month high of 54.1 in March, suggesting first-quarter GDP growth of about 0.3%.  The services PMI was also at a 46-month high.  Manufacturing also improved, rising 0.8 points to a 10-month high of 51.8.  Deflationary pressure lessened.

The German composite PMI rose 1.5 points to an 8-month high of 55.3, pointing to 1Q growth of around 0.4%.  Manufacturing and services hit respective 8- and 6-month highs in this fourth straight month in which each sector scored above the no-change threshold of a 50 reading.

The French composite PMI slid 0.5 points to a 2-month low of 51.7.  The manufacturing (48.2) and services (52.8) readings were also 2-month lows.  French GDP likely rose no more than 0.2% this quarter.

The HSBC-compiled Chinese manufacturing purchasing managers index retreated to 49.2 in March from 50.7, marking the third sub-50 reading in the last four months and constituting an 11-month low.  New business contracted.

Japan’s manufacturing PMI of 50.4 was at a 10-month low, down from 51.6 in February.  Orders and output prices each declined.

Small business sentiment in Japan moved closer to the 50 threshold in March, climbing 2.3 points to a reading of 49.8.  Both manufacturing and non-manufacturers grew more confident this month.

China’s index of leading economic indicators jumped 1.5% in February on top of gains of 0.5% in January and 0.9% in December.  The index of coincident economic indicators fell 0.7%, according to the Conference Board survey, after a drop of 0.4% in January.

Australia’s indices of leading and coincident economic indicators rose by 0.4% and 0.1%, respectively in January.  Each had climbed 0.3% the month before.  Consumer confidence in Australia rose 0.5% to a score of 111.4 in March.

South Africa’s index of leading economic indicators rose 0.3% on month but fell 2.2% on year in January.  The index of coincident economic indicators also rose 0.3% on month.

Overall economic confidence in the Czech Republic weakened in March as business sentiment fell by 0.6 points, while consumer confidence stayed steady.

A bunch of British price reports were released.

  • CPI inflation slowed to zero last month from 0.9% in January.  Core CPI slowed 0.2 percentage points to 1.2%.
  • Retail price inflation edged down 0.1 percentage point to 1.0%.  RPIX inflation, that is core RPI, fell to 1.0% from 1.2%.
  • Producer output prices firmed 0.2% on month but fell 1.8% between February 2014 and February 2015.  Core PPI-O was merely 0.2%. 
  • Producer input prices edged up 0.2% on month in February but were still a whopping 13.5% lower than a year earlier.
  • The DCLG measure of home prices slid 0.2% on month in January and slowed in year-over-year terms to 8.5% from 9.6%.

Hourly wages in Italy posted a 12-month rise of 1.0% in February, down from 1.1% in January.

Finnish producer prices declined 1.8% in the year to February, but a 1.0% monthly gain reversed a 0.9% decline in January.  Seasonally adjusted unemployment in Finland edged up 0.1 of a percentage point to 9.2% in February.

Polish retail sales fell 1.3% in the year to February, while the Polish jobless rate remained steady at 12.0%.

German Chancellor Merkel, in further talks with Greek Prime Minister Tsipras, maintained her strategy of tough love.  The message is take your medicine, and I promise Greece will get stronger.

Several U.S. economic reports arrive today:  consumer prices, the FHFA index of home prices, new home sales, the Richmond Fed manufacturing index, a preliminary manufacturing PMI and weekly chain store sales.  A Hungarian interest rate decision is due.

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

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