Dollar Firmer Especially against Sterling

March 14, 2017

The British parliament granted Prime Minister permission to activate Article 50 of the Lisbon Treaty later this month. Doing so will begin a two-year countdown to negotiate terms and complete the process of leaving the European Union. The dollar advanced 0.8% against the pound in response.

The dollar has also risen 0.2% against the euro, yen, and Australian dollar and 0.1% relative to the Swiss franc, kiwi and Canadian dollar. The dollar fell strongly against the Mexican peso and Indian rupee and is unchanged vis-a-vis the yuan.

Ten-year sovereign debt yields edged a basis point higher in Germany, Great Britain and Japan.

Share prices in India moved up 1.7%, buoyed by an important state election victory for Prime Minister Modi’s party. Stocks gained 0.8% in South Korea, 0.5% in Taiwan, 0.4% in Indonesia, 0.3% in Hong Kong, and 0.1% in China but slid 0.1% in Japan.

The National Bank of Serbia’s Executive Board retained a 4.0% key interest rate. That’s been the level since a 25-basis point cut last July.

On-year growth in Chinese retail sales of 9.5% in January-February was less than forecast and down from a rise of 10.4% in full-2016. Industrial production increased 6.3% on year in the first two months of 2017, a tad more than assumed following a 6.0% advance in 2016. Fixed asset investment growth accelerated to 8.9% in January-February from 8.1% last year.

Industrial production in the euro area rebounded less than forecast in January, rising 0.9% on month after falling 1.2% in December. That left output just 0.6% greater than a year earlier compared to 12-month increases of 2.5% in December and 3.3% in November. Output in January dropped 2.3% in Italy and 0.3% in France but rose 3.3% in Germany.

Investor sentiment toward Germany rose 4.4 points to a 2-month high of 12.8 in March according to the ZEW Institute’s expectations measure. Current conditions printed at a 2-month high as well of 77.3. A greater degree of improvement between February and March was observed in the whole euro area than in Germany.

Ireland’s construction purchasing managers index recovered 2.2 points to a 2-month high in February of 57.9.

German CPI inflation in February was confirmed at 2.2%, up from 1.9% in January, 1.7% in December and 0.8% in October and November. Consumer prices advanced by 0.6% on month, with food jumping 1.6%. Energy prices were 7.2% greater than a year earlier, while all other consumer prices showed a collective 12-month 1.7% increase.

The NIFB measure of U.S. small business sentiment settled back 0.6 points to a reading of 105.3 in February but remained well above its November score of 98.4.

Australian business conditions had a reading of 9 in February after scoring near a 10-year high in January of 16. Business confidence dropped back 3 points to 7 from a 35-month high the month before.

Wholesale price inflation in India jumped more than a percentage point to 6.5% in February.

In other reported price news, consumer price inflation in February was 3.0% in Spain, 1.8% in Sweden, and 1.2% in Finland. Greek import prices climbed 1.1% in January, lifting the 12-month rate of increase to 12.1% from 8.9%.

U.S. producer price data will be released today. The FOMC begins a two-day policy meeting that is widely expected to raise the federal funds rate target to a range of 0.75-1.00%. 1.0% was the funds rate level at the end of the 2001 recession. In 17 straight FOMC meetings between mid-2004 and mid-2006, such was raised from that low to 5.25%.  A big storm is hitting the northeastern U.S. today.

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

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