Mixed Central Bank Signals Lifted the Dollar

November 20, 2015

Stanley Fisher, Vice Fed Chair, said some major central banks, meaning the Fed, could move away from a zero interest rate policy relatively soon, noting also that Fed officials want to avoid the element of surprise and that counterparts in in emerging markets are ready for an initial Fed move.

Atlanta Fed President Lockhart indicated a preference to lift the federal funds rate soon.

ECB President Draghi reaffirmed that a full review of Euroland’s economy is being prepared ahead of its meeting next month and that officials are ready to utilize all measures asap to expedite achievement of its inflation mandate.  He praised the flexibility of the asset purchase plan and hinted again that the minus 0.20% deposit rate could be lowered further.

Bundesbank Bank President and ECB Governing Council member Jens Weidmann sounded a note of caution, however, saying that the full impact of easing thus far has not fully been felt.

The dollar rose 0.5% against the euro, 0.3% versus the Swiss franc, 0.2% relative to the loonie and 0.1% vis-a-vis sterling.  The yen and yuan are unchanged.  The U.S. dollar slid 0.3% against its Australian counterpart and 0.1% versus the kiwi.

In a follow-up move to reductions of the main Chinese central banks announced October 23rd, officials at the Peoples Bank of China cut the standard facility rate for banks by 175 bps to 2.75% and the 7-day rate by 200 bps to 3.5%.

Share prices around the Pacific Rim posted gains of 1.0% in Hong Kong, 0.4% in China, 0.9% in Indonesia, 0.3% in Australia and New Zealand and 0.1% in Japan, South Korea and India.  In Europe, stocks tumbled 1.7% in Greece and have lost 0.6% in Spain and Italy as well as 0.3% in France.  The German Dax is up 0.1%, while the British Ftse has remained flat.

West Texas Intermediate crude oil fell 1.1% to $40.09 per barrel.  Comex gold is 0.3% stronger at $1,084.48 per ounce.

Ten-year Japanese JGB and German bund yields are two and one basis points higher.  The 10-year British gilt yield is holding steady at 1.88%.

Real GDP in the OECD, a group of 34 advanced economies, rose 0.4% last quarter, least since 2Q14 and down from a quarterly gain of 0.6% in the second quarter.  Non-annualized 3Q-on-2Q growth was 0.5% in the U.K., 0.4% in the U.S. and European Union, but minus 0.2% in Japan.

A 2.3% on-year drop in German producer prices last month was the largest 12-month decline since February 2010.  Energy sank 0.9% on month, while other producer prices collectively fell 0.3%.  Irish producer prices were flat on month but climbed 1.8% during the twelve months to October.

Public-sector borrowing in the U.K. last month exceeded expectations, amounting to GBP 8.2 billion excluding public sector banks.

China’s index of leading economic indicators recorded a smaller 0.6% monthly increase in October, down from gains of 1.6% in September and 0.9% in August.

The Greek current account surplus, EUR 838 million, was 37.4% wider in October than a year earlier. 

Icelandic labor costs increased 7.9% in the year to October, down from 8.2% in September.  Danish retail sales rose 0.5% on month and 2.5% on year in October, while Danish consumer confidence in November climbed for the first time since March.  Turkish consumer sentiment also rose, hitting a 19-month high this month.

A preliminary estimate of eurozone consumer sentiment will be reported later today.

Malaysian consumer prices ticked 0.4% higher in October but edged down 0.1 percentage point to 2.5% in its year on year comparison.

Canadian retail sales and consumer price data get released today.  So does the Kansas City Fed monthly manufacturing index.  The U.S. Thanksgiving Day and Japanese Labor Thanksgiving holidays will interrupt the flow of market activity next week.

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

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