Lower Yen and Stronger Norwegian Krone as Oil Recovers
May 12, 2016
WTI oil rose 0.9% to a six-month high above $46/barrel after indications of a diminishing supply glut. Comex gold fell 0.5% overnight.
The dollar rebounded 1.4% against the yen. Norway’s krone advanced 1.1% against the euro. The dollar climbed 0.6% relative to the Aussie dollar but is narrowly mixed versus sterling, the Swiss franc, the kiwi, the yuan, the euro and the loonie.
Share prices in the Pacific Rim rose 0.4% in Japan, 0.8% in India and 0.5% in Singapore but fell 0.5% in Hong Kong, 0.3% in Taiwan and New Zealand, and 0.2% in Australia. In Europe, equities have recovered 1.4% in Greece, 1.0% in Spain, 0.8% in Germany, 0.6% in France, 0.5% in Italy and 0.2% in the U.K..
The ten-year British gilt yield rose three basis points, but its Japanese and German counterparts slipped a basis point.
Eurozone industrial production dropped 1.2% in February and another 0.8% in March but still recorded an average 0.9% gain between the final quarter of last year and the first quarter of 2016. Production in March was just 0.2% greater than a year earlier.
German wholesale prices rose 0.3% in April but posted a slightly larger 2.7% 12-month rate of decline. Oil and solid fuel prices were 16.7% lower than a year earlier.
In another as-expected unanimous vote, the Monetary Policy Committee of the Bank of England chose not to change its monetary policy settings. The released statement identified the upcoming referendum on EU membership as the dominant uncertainty and had this to say about its possible consequences:
This combination of influences on demand, supply and the exchange rate could lead to a materially lower path for growth and a notably higher path for inflation than in the central projections set out in the May Inflation Report. In such circumstances, the MPC would face a trade-off between stabilising inflation on the one hand and output and employment on the other. The implications for the direction of monetary policy will depend on the relative magnitudes of the demand, supply and exchange rate effects. Whatever the outcome of the referendum and its consequences, the MPC will take whatever action is needed to ensure that inflation expectations remain well anchored and inflation returns to the target over the appropriate horizon.
Central banks in Norway and The Philippines left their key interest rates unchanged at 0.5% and 4.0%, respectively. Both actions were expected. Higher oil prices and the Norges Bank decision propelled the krone higher. Norwegian GDP advanced 1.0% last quarter after sinking 1.3% in 4Q15.
Japan’s current account surplus of JPY 2.98 trillion in March was 6.9% wider than a year earlier. The fiscal 2015 surplus of JPY 17.98 trillion exceeded the fiscal 2014 surplus by 106%. Exports and imports recorded on-year declines of 11.4% and 16.6% in March and of 3.3% and 11.8% last fiscal year. The seasonally adjusted current account printed at JPY 1.89 trillion in March following a surplus of JPY 1.69 trillion in February.
Japan’s customs trade balance in the first twenty days of April was JPY 202 billion versus a deficit of JPY 274 billion a year earlier. Exports fell 9.8%, but imports plunged 20% on year.
Japanese stock and bond transactions generated a JPY 700 billion net capital outflow last week but a JPY 4.29 trillion surplus in April. March 31st marks the end of Japan’s fiscal year.
Japan’s economy watchers index fell more than expected in April, printing 1.9 points lower at 43.5. The economy watchers outlook index dropped 1.2 points to 45.5.
Japanese bankruptcies posted an on-year drop of 7.1% last month, about half as much as the on-year 13.2% decline in March.
Japanese on-year growth in bank lending of 2.2% in April as the same pace as in the first quarter.
New Zealand food prices rose 0.5% in the year to April. New Zealand’s manufacturing purchasing managers index rose 1.7 points to a 3-month high of 56.4 in April.
In the year to April, consumer prices rose 0.8% in Sweden but fell 3.3% in Romania, 0.1% in France, and 0.1% as well in Ireland.
Dutch retail sales in March surpassed their year-earlier level by 3.9%. Hungarian and Romanian industrial production in the same span fell by 2.4% and 0.4%.
Scheduled U.S. data today include import prices, the federal budget, and weekly jobless insurance claims.
Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of England, eurozone industrial production, Japanese current account, Norwegian krone