Cheaper Dollar as U.S. Political Surprises Mount

May 17, 2017

The dollar fell overnight by 0.7% against the yen, 0.4% relative to the euro, Swiss franc and sterling, and 0.1% versus the kiwi. The dollar alternatively rose 0.4% against the peso, 0.3% versus the Aussie dollar, ad 0.2% relative to the loonie.

Ten year German bund and British gilt yields are two basis points lower, and U.S. Treasury futures show a reduced yield, too.

Share prices are mostly weaker. Stocks fell 1.1% in Australia, 0.6% in Japan and Indonesia, and 0.3% in China. Losses so far in Europe tally 0.6% in Switzerland and Italy, 0.5% in France, 0.3% in Germany and 0.1% in Great Britain.

Comex gold strengthened 1.0% to $1,248.50 per ounce, and WTI crude oil of $48.91 has risen 0.5% above Tuesday’s close.

The Icelandic 7-day repo rate was sliced 25 basis points to 4.75% in an expected move. This third reduction of the current easing follows cuts of 25 basis points follows cuts of 25 basis points last December and 50 bps in August 2016.

Poland’s central bank retained a record low 1.5% reference interest rate. That’s been the level since reductions of 50 basis points each in January and March of 2015.

The revised Eurozone CPI report for April confirmed that consumer prices had risen 0.4% on month and 1.9% from a year earlier. Core consumer prices were 0.5% higher than in the previous month and jumped a half percentage point in on-year terms to 1.2%. Prices for services and non-energy industrial goods went up 0.5% and 0.6% on month, more than the 0.3% uptick in the energy component.

Construction output in the euro area of 2.7% in January and 1.1% in March sandwiched a 5.5% increase in February, producing a first-quarter average level that was 0.8% greater than the prior quarter and 1.7% higher than in the first quarter of 2016.

The latest British labor statistics are out. Jobless claims increased 19,400 in April on top of a 33.5K advance in March, but the ILO-basis jobless rate of 4.6% in the first quarter was 0.1 percentage point lower than forecast. Average wage costs in the first quarter were 2.4% higher than a year earlier, but the gain was just 2.1% for regular pay and excluding bonuses.

Revised Japanese industrial production in March showed a slightly smaller 1.9% drop and a 3.5% 12-month rate of increase. The preliminary indications were a 2.1% monthly decline and a 3.3% rise. Output in the first quarter rose only 0.2%  on quarter but by a hefty 3.8% on year. Production had posted consecutive calendar year declines of 1.2% in 2015 and 0.1% in 2016. Capacity was 0.7% lower in March than a year before, while capacity usage increased by 3.5%.

Japanese core private domestic machinery orders registered a smaller-than-expected 1.4% increase in March and fell by 1.4% in the first quarter. METI officials project another decline in the spring quarter of 2017. Government machinery orders rebounded 15% in March after a 35.4% plunge in February. Export orders slid 2.8% in March and 2.2% in the first quarter.

New Zealand producer output prices went up 1.4% last quarter and accelerated to a 4.1% on-year pace. Producer input prices recorded a similar 4.2% advance from the first quarter of 2016 to the first quarter of 2017.

Australian wage cost inflation remained at 1.9% for a third straight quarter in 1Q17. That’s down form 2.0% in 1Q16, 2.2% in 1Q15 and 2.3% in 1Q14. The Westpac measure of Australian consumer sentiment fell by 0.7% in April and another 1.1% this month.

Former FBI Director Comey kept a log of phone conversations, one of which from President Trump in February notes that he was urged to close down the investigation of ties between Russian officials and National Security Adviser Flynn that may reveal complicity in enabling that U.S. enemy to influence the outcome of November’s election. To be determined is exactly what President Trump may have said, whether such was within his right or constitutes a crime, and whether the drama regardless of the true facts will affect what federal legislation this year and next.

Canadian manufacturing sales rose 1.0% in March and were 8.2% greater than a year earlier.

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

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