Dollar in Retreat
March 21, 2017
The dollar’s weaker again. The euro rose above $1.080 for the first time since February 2 and hit its best level since January 31. The greenback has fallen 0.9% against sterling, 0.7% relative to the euro, 0.4% vis-a-vis the kiwi, 0.3% versus the Swiss franc, Chinese yuan and Mexican peso, 0.2% against the loonie, and 0.1% versus the Aussie dollar. The peso has recovered some 16% since President Trump took office.
FBI Director Comey’s congressional testimony yesterday was damaging to President Trump’s political capital.
Other governments are strengthening ties with one another especially in the area of trade to present a more united and effective front against the policy changes Trump is trying to implement.
In a TV debate last night, the independent presidential candidate Emmanuel Macron outshined the others, allaying some concern that Far Right Le Pen might get elected and make good on her promise to take France out of the EU.
A greater-than-expected acceleration of British inflation in February helped lift sterling by 0.9% against the dollar thus far today. Consumer prices were 2.3% higher than a year earlier, most since September 2013. Core CPI rose 0.4 percentage points to 2.0%. A 3.7% rate of producer output inflation was the most since the last month of 2011, and producer input inflation was at a lofty 19.1%. Pressure may mount on the Bank of England to back away from its ultra-loose stance. This month’s policy meeting drew a dissenting vote from MPC member Kristen Forbes in favor of raising the Bank Rate back to 0.50%.
Stocks in Asia closed mixed. While markets slipped 0.3% in Japan, 0.2% in Singapore and 0.1% in Australia and India, South Korean equities (+1.0%) led a further rally in emerging economies. Stocks closed up 0.6% in Taiwan, 0.5% in Hong Kong and 0.3% in China. In Europe, stocks are up 1.0% in Italy, 0.7% in Spain, 0.3% in France, but down 0.2% in the U.K. and 0.1% in Switzerland. The German Dax is flat.
Copper has fallen over 1.0%, and Comex gold edged 0.1% lower to $1,233.20 per ounce. WTI oil recovered 0.6% to $48.53 per barrel.
The recent drop in 10-year sovereign debt yields was trimmed in Europe where gilts are up 4 basis points and German bunds have risen 3 bps. Futures trading in U.S. Treasuries point to a higher U.S. yield but not yet baci to 2.50%. The 10-year Japanese JGB slipped a basis point to 0.06%.
Minutes from the March Board meeting at the Reserve Bank of Australia reveal more optimism about domestic growth but scant concern regarding inflation, which is projected to move only gradually higher amid continuing spare capacity and subdued wage pressures.
However, Australian home price inflation accelerated to 7.7% last quarter, and Australia’s index of leading economic indicators rose 0.4% in January on top of increases in December and November of 0.3% and 0.5%, respectively.
The British government’s proprietary house price index settled back to a 12-month increase of 6.2% in January from 7.2% the month before and 7.7% in the first two months of 2016.
Prime Minister May signaled that March 29th is the day on which she intends to invoke Article 50 of the Lisbon Treaty, which will commence a 2-year countdown to exiting the European Union.
The U.K. CBI’s monthly industrial trends index held at +8 in March. That reading in February was the best in two years.
Switzerland’s trade surplus narrowed to CHF 3.11 billion last month from CHF 4.8 billion in January as exports kept declining but imports swung to a rise. Swiss M3 money growth accelerated to a 12-month 3.1% in February.
Germany’s council of economic advisers project real growth this year of 1.4%, with a 2.2% rate of CPI inflation. The group urged the ECB to begin reducing quantitative stimulus soon, and the experts also defended Germany’s large current account surplus.
Spain’s trade deficit widened 29% on year to EUR 3.1 billion in January.
The U.S. fourth-quarter and full-2016 current accounts will be reported today. The Fed district presidents of Cleveland, New York and Kansas City speak publicly today. Canadian retail sales arrive.
Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Article 50, British CPI, French TV debate, U.S. current account
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