Dollar Lower after FOMC Minutes

October 9, 2015

The FOMC minutes from September’s meeting were not as hawkish as anticipated.  Committee members didn’t raise rates because of concern that global developments like the stronger dollar and weaker Chinese demand might dampen U.S. growth and inflation in the future, and they therefore decided to delay the onset of rate tightening, pending data that will confirm or reject that risk.

The dollar fell overnight by 1.1% against the Australian currency, 0.8% relaitve to the loonie, 0.7% vis-a-vis the euro, 0.6% versus the Swiss franc, and 0.5% against the kiwi.  The dollar firmed 0.3% against the yen, stayed steady versus sterling, and dipped 0.1% relative to the yuan.

Ten-year German bund and British gilt yields are up by three and two basis points, but the 10-year Japanese JGB dipped a basis point.

West Texas Intermediate oil jumped 2.0% and back above the $50 threshold to $50.41 per barrel.  Comex gold advanced 1.5% to $1,155.75 per troy ounce.

Share prices in the Pacific Basin climbed 1.5% in Japan, 1.3% in China, 2.2% in Indonesia, 1.8% in Singapore, 1.3% in Australia, 0.9% in India and 0.7% in South Korea.  Gains in European stock markets thus far total 1.3% in Spain, 1.2% in Germany, 1.0% in France, 0.5% in Greece, 0.8% in Italy and 0.3% in Britain.

French industrial production snapped back 1.6% in August, three times more than expected and the biggest monthly increase in 16 months, after a 1.1% slide in July.  Production over the latest three-month period was unchanged from March-May and 0.6% higher than a year earlier.

Italian industrial production, in contrast, fell 0.5% in August but also was unchanged in June-August from the previous three months.

Dutch industrial output fell 1.6% on month and 0.6% on year in August, the first drop in a half year.  Greek industrial production plunged 8.7% on month but rose 4.5% on year in August.  Finnish industrial output fell 0.7% on month and 2.3% from August 2014.

British trade statistics and construction output figures both highlight deteriorating conditions.

  • The merchandise trade deficit of GBP 11.149 billion in August was slightly more than 10% greater than forecast.  The goods and services deficit was 8% wider than a year earlier.
  • Construction output dived 4.3% on month in August.  That was the second drop in a row and the largest decline in 32 months.  A 1.3% on-year slide was the first 12-month decline since May 2013.

Greek consumer prices declined 1.7% between August 2014 and a year later.  After standardizing the data to pan-EU specifications, the on-year drop was 0.8%, twice as much as in July.

Norwegian consumer prices rose 2.1% in the year to September, a shade less than forecast, and producer prices plunged by 10.1%.

Hungary’s EUR 459 million trade surplus in August was marginally greater than a year earlier but smaller than forecast.  Austria’s trade surplus in July contracted 90% on month to just EUR 33.5 million.  Denmark’s trade surplus of DKK 5.459 billion in August was 18.6% larger than in July.

Australian mortgage loans increased by a smaller-than-projected 2.9% in August.

Investors await Canadian labor statistics for September due later today as well as U.S. import prices and public remarks by Lockhart and Evans of the Federal Reserve.

The annual IMF/World Bank meetings starting today in Lima, Peru and running through the weekend could produce market-moving rhetoric.  The revised IMF World Economic Outlook, published earlier this week, revised projected global GDP growth in 2015 to 3.1% from a forecast of 3.3% made in July.  Global growth in 2016 is expected to be 3.6%, also revised down 0.2 percentage points (ppts).  The IMF anticipates GDP rising next year by just 1.0% in Japan, 1.6% in the eurozone, 2.8% in the U.S., and 6.3% in China.  The Brazilian and Russian economies are projected to contract further in 2016 after respective implosions this year of 3.0% and 3.8%.

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

Tags: , ,


Comments are closed.