Modestly Softer Dollar

June 22, 2016

Dollar slippage so far today amounts to 0.6% against the Aussie dollar, 0.5% versus the kiwi, 0.4% relative to sterling and the euro, 0.3% vis-a-vis the yen and loonie and 0.2% against the yuan.

Janet Yellen will be reprising her semi-annual testimony on monetary policy and the U.S. economy, this time before the House Financial Services Committee.  Yesterday before the Senate, she stressed the gradual nature of rate increases and enumerated several economic headwinds like weak household formation, meager productivity growth and external risks like tomorrow’s British vote on whether to remain in the EU or leave such.

Investors and professional bettors believe that the result will be a vote to stay, mainly on a momentum swing after last week’s assassination of MP Jo Cox.  The opinion polls, in contrast, suggest the vote is too close to call ahead of tomorrow’s showdown.

Japan’s Nikkei closed down 0.6%.  Other bourses in the Pacific Rim fell 1.0% in New Zealand, 0.2% in India and 0.1% in Australia and Singapore but rose by 0.9% in China, 0.7% in Hong Kong, 0.5% in South Korea and 0.4% in Taiwan.  Share prices are also mixed in Europe, rising 0.6% in Germany, 0.3% in France, 0.2% in the U.K. and 0.1% in Spain but falling 0.5% in Italy, 0.6% in Greece and 0.1% in Switzerland.

Ten-year German bund and Japanese JGB yields are unchanged.  The 10-year British gilt yield firmed two basis points.

West Texas Intermediate crude oil climbed 1.3% on signs of lessening inventory to $50.50 per barrel.  Comex gold is 0.4% softer at $1,268 per ounce.

The Bank Thailand left its key interest rate at 1.5% as expected, stressing downside risks in the global recovery.

Indices of leading economic indicators rose 0.2% and 1.2% respectively in May in Australia and Mexico.

The Swiss ZEW expectations index, a measure of investor confidence in that economy, improved to 19.4 in June from a reading of 17.5 in May.

Swedish unemployment of 7.6% in May exceeded analyst expectations and April’s 7.3%.  Norwegian unemployment of 4.6% in April was 0.4 percentage points above its year-earlier level.

South African CPI inflation edged down 0.1 percentage point to a 5-month low in June of 6.1%, and core inflation of 5.5% was a tad lower than forecast.

In June, Danish consumer sentiment improved 1.2 points to a reading of 4.4, and retail sales posted a 0.3% increase compared to a year earlier.

Turkish consumer confidence improved to a 5-month high of 69.4 in June from 68.8 the month before.

Icelandic wage costs in May were 13.3% above their May 2015 level.

U.S. existing home sales and the FHFA measure of home prices get released today.  Yellen’s testimony today begins at 10:00 AM EDT.

Results of the Brexit referendum result are expected to become known in London between 4 am and 7 am on Friday morning local time, which translates to 11 PM Thursday to 2 AM Friday in New York and Washington.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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