Somewhat Softer Dollar in Wake of G20 Meeting of Finance Ministers and Central Bank Chiefs

March 20, 2017

The dollar slipped overnight by 0.4% against the New Zealand and Australian dollars, 0.2% relative to the euro and sterling, and 0.1% vis-a-vis the Swiss franc. The dollar is unchanged against the loonie and up 0.2% versus the peso and 0.1% against the yen and yuan.

The Japanese and Mexican markets are shut for the Vernal Equinox holiday and Juarez Day, respectively.

Share prices in the Pacific Rim rose 0.8% in Hong Kong and 0.4% in China but fell 2.0% in New Zealand, 0.4% in Australia, South Korea and India. Equity markets in Europe have fallen so far by 0.4% in Germany, France and Italy, 0.3% in Spain, and 0.2% in the U.K. and Switzerland.

The futures quote on the U.S. 10-year Treasury yield is unchanged at 2.50% and near a 2-week low, while yields edged up a basis point in Germany and Britain.

West Texas Intermediate crude oil plumbed 1.3% further downward to 48.14 per barrel. Industrial metals also slid, while Comex gold edged up 0.2% to $1,232.80 per ounce.

In a day short on released data, the main theme at the start of the new week has been America against the world. A statement released on Saturday at the conclusion of a 2-day G20 meeting appeared at first glance to be an exercise in appeasement, as the previous pledge to resist all forms of protectionism by the group was deleted to satisfy the U.S. delegation. But what has emerged subsequently is that other industrial nations are not prepared to be picked off one by one. Alliances between China and Germany, Japan and Germany, the EU and Latin America and the EU and Canada are being tightened up. The United States represents only 4.3% of global population, and other countries are preparing to tackle common challenges without U.S. participation if necessary.

German producer prices rose only 0.2% on month in February, but the 12-month rate of increase climbed 0.7 percentage points to a 62-month high of 3.1%. Energy went up 5.4% on year, while all other producer prices collectively rose 2.2%. Mineral oil prices were 22.7% higher than a year earlier.

Labor costs in the euro area were 1.6% greater than a year earlier in the final quarter of 2016, a mere acceleration from 1.5% in the final quarter of 2015. Higher energy prices have not yet triggered second-order pressures in the labor market.

Dutch consumer confidence again strengthened to a reading of 16 in March from 14 in February, 13 in January and 12 in December.

British house price inflation according to the Rightmove index remained steady at 2.3% in March, which is still down from 3.2% in December and 4.2% in October.

South Korean PPI inflation accelerated to 4.2% in February from 3.7% in January.

Consumer confidence in New Zealand fell back 1.1% this quarter after an upward spike of 4.7% in 4Q16. This gauge compiled by Westpac was 2.1% stronger than in the first quarter of 2016 and 0.4% above the series long-term average reading.

The Chicago Fed National Activity Index and Canadian wholesale turnover data will be released today. Chicago Fed President Evans and German Bundesbank President Weidmann are scheduled to speak publicly. Having just met with German Chancellor Merkel, Japanese Prime Minister Abe is in Europe to head up trade talks tomorrow.

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

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