Reaction to Trump Remarks Muted by Coming Holidays

April 13, 2017

President Trump gave an exclusive interview to the Wall Street Journal in which among other things he complained that the dollar was too strong, proclaimed that China is not a currency manipulator, and jaw-boned the Fed to keep interest rates low.

Markets were closed today in Norway and Mexico. Good Friday observances tomorrow will shut most major markets tomorrow, Japan and China being notable exceptions, and many will remain closed for Easter Monday on April 17. These holidays seem to have muted market reaction to Trump’s provocative remarks.

Although the yen initially spiked to a 5-month high of 108.7 per dollar, it is currently trading 0.1% lower than Friday’s closing level. The dollar otherwise has risen 0.4% against the euro, 0.2% versus the Swiss franc and 0.1% vis-a-vis sterling but shows losses of 0.9% against the Aussie dollar where a huge 60.9K jump in employment was reported. The dollar also lost 0.6% against the kiwi and 0.1% relative to the peso.

Note that although the U.S. Treasury market will be closed on Good Friday, the Labor Department’s CPI report and Commerce Department retail sales will be published, and so will the Treasury Department’s semi-annual review of foreign exchange market conditions and currency and trade policies of other nations.

U.S. equities are little changed at this writing. Japan’s Nikkei continued its recent downtrend, losing another 0.7%. Share prices fell 0.7% in Australia, 0.6% in in India and 0.5% in Singapore and Indonesia but climbed 0.9% in South Korea. Equity markets in Europe are broadly but not sharply lower.

Geopolitical tension is keeping commodities in demand. Gold and oil have risen today by 0.5% and 0.3% to $1,284.40 per ounce and $53.29 per barrel. Copper has advanced over 1.0%.

While the 10-year Treasury yield is two basis points firmer, the comparable German and British sovereign debt yields are down a basis point.

The Monetary Authority of Singapore, whose interest rate policy is subordinated to an exchange rate target that is reviewed semi-annually every October and April, left the Singapore dollar’s trade-weighted target corridor unchanged in all regards. The range for the next half year will have zero slope and an unchanged width and midpoint. Officials at MAS consider the current stance appropriate and unlikely to need change for an extended period. Real GDP in Singapore fell 1.9% on quarter in 1Q17 and was only 2.5% greater than ┬áin the first quarter of 2016.

The Central Bank of Brazil’s Selic interest rate was slashed by a full percentage point to 11.25% in recognition of falling inflation and lower inflation expectations. The rate has been lowered by three percentage points since October 2016.

The Bank of Korea retained a 1.25% Base Rate for South Korea. That’s been the level since a 25-basis point cut in June 2016.

China’s trade balance remained closer to balance in March. After recording an average surplus of $46.63 billion over the six months through January, the balance swung to a $9.15 billion deficit in February and recovered only to a surplus of $23.93 billion last month when both import and export growth exceeded expectations.

Australia recorded monthly private sector job creation of 38.8K in February and a whopping 74.5K in March. The labor participation rate last month of 64.8% was 0.2 percentage points greater than in February, so the jobless rate stayed level at 5.9%.

U.S. producer prices dipped 0.1% on month and rose 2.3% on year in March. Both changes were 0.1 percentage point (ppt) lower than forecast. Core PPI inflation dipped 0.1 ppt to 1.7%. The 12-month rise in energy fell to 15.2% from 19.2%.

Consumer price data were also reported by Germany, France, Italy, Finland and Ireland. German consumer price inflation slowed from 2.2% in February to a 4-month low of 1.6% in March as energy and food posted monthly declines of 0.9% and 1.4%, while services edged just 0.1% above February’s level. French CPI inflation subsided to 1.1% last month from 1.2%, and Italian CPI inflation slowed 0.2 percentage points to 1.4%. Finnish CPI inflation slowed 0.4 ppts to 0.8%, but Irish harmonized CPI inflation doubled to all of 0.6%.

The Swiss producer price and import price index combined index edged up 0.1% in March, leaving the 12-month rate of increase unchanged at 1.3%. Domestic PPI went up only 0.4% on year, but import prices were 3.2% higher.

New U.S. jobless insurance claims of 234K last week were fewer than forecast and resulted in a 247.25K average gain over the latest four-week period. The U. Michigan/Reuters index of U.S. consumer sentiment rose 1.1 points to 98.0 in April, highest since January.

A banking survey conducted by the Bank of England indicates that consumer credit will likely drop this quarter. The British Royal Institute of Chartered Surveyors’ monthly house price balance index stayed unchanged at 22% in March. In February, that result had represented a 3-month low.

New Zealand’s business purchasing managers index improved 2.1 points to 57.8 in March. In January such had been as low as 52.2. A separate New Zealand release indicated that food prices fell 0.3% on month in March after only a 0.2% rise the month before.

Japanese M2 money growth accelerated to 4.3% in March from 4.2% in February and to 4.2% in the first quarter from 3.9% in 4Q16 and 3.5% in calendar 2016. Stock and bond transactions in the first week of Japan’s new fiscal year generated a huge JPY 3.121 trillion net capital inflow.

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

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