Dollar Trading More Firmly on PMI Day

June 1, 2017

A load of manufacturing purchasing manager surveys were reported today.

The dollar has strengthened by 0.4% against the Australian dollar and sterling, 0.3% versus the yen, and 0.1% relative to the euro and Swiss franc.

The dollar has softened 0.2% versus the Chinese yuan for its fourth daily drop in a row. The dollar also eased 0.2% vis-a-vis the peso and 0.1% against the loonie, but is flat relative to the kiwi.

West Texas Intermediate crude oil recovered 0.5% to $48.55 per barrel. U.S. President Trump will announce his decision later today on whether to accept of walk away from the Paris agreement on climate change. Expectations are that he will reject such at least on a conditional basis. Gold softened 0.6% to $1,268.20 per ounce.

Like the dollar, stocks have a better tone today. Japan’s Nikkei closed 1.1% higher, and equities also climbed 0.8% in Singapore, 0.6% in Hong Kong, 0.5% in Taiwan, 0.4% in New Zealand and 0.2% in Australia. China’s market lost 0.5%, however. Share prices in Europe have risen 0.7% in France, 0.5% in Switzerland and Italy, 0.4% in the U.K. and Greece, and 0.3% in Germany, but Spain’s market has eased 0.3%.

The ten-year German bund and Japanese JGB yields are steady, while their British counterpart has risen another basis point amid uncertainty ahead of parliamentary elections a week from today.

Euroland’s manfacturing PMI reading in May of 59.5 is a 73-month high. It’s 0.1 point above the flash estimate and 1.3 points better than April’s score. Factory activity was paced by Germany whose PMI was also 59.5 and at a 73-month peak. That was followed by 58.0 in Austria (2-month low), 57.6 in The Netherlands (4-month low), 55.9 in Ireland (22-month low), 55.4 in Spain (4-month low), 55.1 in Italy (3-month low), 53.8 in France (2-month low) and 49.6 in Greece (a 9-month high).

Although many of the PMIs reported today were lower than in April, the overall global picture suggests an economic upswing (meaning readings above 50) and receding inflationary pressure.

The British PMI slipped back from April’s 3-year high by less than expected to 56.7.

Japan’s manufacturing PMI rose 0.4 to a 3-month high of 53.1.

Australia’s factory PMI reading of 54.8 was down from 59.2 in April and the lowest since January.

The Swiss manufacturing PMI of 55.6 also constitutes a 4-month low.

Sweden’s PMI of 58.8 was below 60 for the first time since last November.

Norway’s PMI of 54.3 was a 3-month low.

Poland’s PMI reading of 52.4 was at a 6-month low, and the Czech reading of 56.4 was a 4-month low.

However, Hungary’s PMI spiked 5.9 points to a record high of 62.1, and Turkey’s PMI of 53.5 reflected the quickest positive growth in 41 months.

Russia’s PMI rebounded 1.6 points to a 2-month high of 52.4.

Moving to Asia, Caixin reported an 11-month low of China’s manufacturing PMI with a reading of 49.6.

The Vietnamese PMI fell 2.5 points to a 14-month low of 51.6. India’s PMI slipped to a 3-month low of 51.6. The Thai PMI stayed below 50 at 49.7, a six-month low. Taiwan’s 53.1 reading was at a 7-month low. Malaysia’s PMI score of 48.7 was a 4-month low.

South Korea’s manufacturing PMI remained under 50 at a 2-month low of 49.2. The Filipino PMI improved a full point to a 5-month high of 54.3.

South Africa’s ABSA manufacturing PMI jumped 6.8 points to a 2-month high of 51.5.

In other economic data released this morning,

  • Japanese business investment posted on-year growth of 4.5% last quarter. Sales and earnings were up 5.6% and 26.6%.
  • Japanese motor vehicle sales recorded on-year growth in May of 6.1%, somewhat more than April’s 5.4% but less than double-digit gains in both February and March.
  • Japanese stock and bond transactions generated a 772 billion yen net capital outflow in the week of May 26.
  • Finnish real GDP expanded 1.2% on quarter and 2.7% on year in 1Q17.
  • Swiss real GDP rose by a smaller-than-forecast 0.3% on quarter and 1.1% on year in 1Q.
  • Swiss retail sales advanced 1.0% in April, more than in any month from the first quarter, and 2.7% on year.
  • Italian GDP grew 0.4% last quarter, same as in the final period of 2016. GDP was 1.2% greater than a year earlier
  • The British Nationwide house price index showed lessening strength, edging 0.2% lower than April’s level and registering only a 2.1% 12-month rate of increase, down from 4.5% at the end of 2016 and 5.6% last August.
  • In the year to May, Thai consumer prices were unchanged, and its PPI slipped 0.2%. CPI inflation slowed in Cyprus to just 1.1%.
  • Australian retail sales rose 1.0% on month and 2.7% on year in April. Australian business investment rose 0.3% last quarter, failing to fully reverse a 1.0% slide in the final quarter of 2016.

The Central Bank of Brazil’s Selic interest rate was reduced to 10.25% from 11.25%. It’s fallen 350 basis points so far in 2017, and officials anticipate a further reduction this year of close to 2 percentage points.

San Francisco Federal Reserve President Williams expects 2-3 additional rate hikes in 2017.

Bank of Japan Board member Harada rejects criticism that quantitative easing will generate eventual big losses on the central bank’s bond portfolio. He said QE needs to continue until inflation rises further.

The Fed Beige Book released yesterday documented modest to moderate growth in April-May but noted some regions where activity has been slower.

U.S. scheduled data releases today include the manufacturing PMI, construction spending, the ADP estimate of private employment growth, weekly jobless insurance claims, monthly motor vehicle sales, and quarter labor productivity and unit labor costs.

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

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