Dollar Up ahead of Trump’s First Press Conference

January 11, 2017

The dollar appreciated overnight by 0.5% against the euro, 0.4% versus the yen, Swissie and sterling, 0.2% relative to the Mexican peso, and 0.1% relative to the yuan. It dipped 0.1% vis-a-vis the New Zealand and Australian currencies but extended its rise against the Turkish lira by about 2%.

The juxtaposition of Obama’s Farewell Address last night and today’s first press conference by President-Elect Trump underscores a passing of the baton. Trump intends to erase Obama’s legacy. Obama defended his record and gave a speech that keeps him at the forefront of the Democratic Party at least until new standard-bearer emerges.

Stocks around the world rose 1.5% in South Korea, 0.9% in India, 0.7% in Hong Kong, 0.4% in New Zealand, and 0.3% in Japan. Equities in Europe are narrowly mixed.

The ten-year German bund yield rose five basis points. Japan’s JGB yield is steady, and the 10-year British gilt slipped three basis points.

West Texas Intermediate crude oil increased 0.6% to $51.12 per barrel, and Comex gold edged 0.2% higher to $1,187.30.

Two central banks held policy meetings today.

  1. The National Bank of Poland’s Monetary Policy Council maintained a 1.5% reference interest rate as expected. The rate was previously cut by 50 basis points each in October 2014 and March 2015. Eight earlier reductions between November 2012 and July 2013 reduced the the 7-day repo rate to 2.50% from 4.75%.
  2. Markets are still awaiting the Selic interest rate decision from Copom, the policy-making committee at the Central Bank of Brazil. The Selic rate rate was cut by 25 basis points at the prior meeting on November 30 and initially by that same magnitude in mid-October. The rate had been at 14.25% from late July 2015 until the October 2016 reduction.

British industrial production rebounded sharply in November, rising 2.1% on month after October’s drop of 1.1%. Production was also 2.0% higher than a year earlier. In the three months to November, output slipped 0.6% compared to June-August and was 0.5% higher than a year earlier, down from on-year growth of 1.4% in the three months to August.

Britain’s goods and services trade deficit of GBP 4.167 billion in November was almost three times larger than the deficit of GBP 1.547 billion in October but smaller than the deficits in August and September, each of which surpassed GBP 5.0 billion. The merchandise trade gap widened to a 2-month high of GBP 12.163 billion in November from GBP 9.885 billion the month before.

Construction output in the U.K. dipped 0.2% in November on top of a 0.6% slide in October but was still 1.5% larger than in November 2015.

Japanese international reserves fell $2.388 billion last month and plunged $43.2 billion during the fourth quarter to $1.217 trillion at yearend.

The trend in Japan’s index of coincident economic indicators was declared by officials to be “improving” in November just as such had been in October. The designation previously had been “weakening” from May 2015 through September 2016. The index of leading economic indicators jummped 2.0 points in November to a reading of 102.8, highest since August 2015.

Other released data today showed

  • A 22-month low in Irish consumer confidence and a minuscule 0.1-point downtick in South African business sentiment.
  • End-year consumer price inflation rates of 6.3% in Brazil, 0.9% in Portugal, and zero in Greece.
  • A 0.2 percentage point decline in South Korean unemployment to 3.4% as well as greatly increased import price inflation there of 9.2%.
  • A 5.8% leap in U.S. mortgage applications last week.
  • November-over-November increases in industrial production of 3.2% in Spain, 11.3% in Denmark and 6.5% in Malaysia.

The Trump press conference is scheduled to start at 11:00 EST (16:00 GMT). Greater insight into future U.S. policy is likely to emerge from this venue than the inaugural address nine days later. Markets will react to both the content of what the President-Elect divulges and whether he appears “presidential,” consistent and sincere in his views, and his overall attitude toward the press.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without expressed permission.

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