Dollar and Fixed Income Security Prices Soften

June 29, 2017

The dollar declined overnight by 0.5% against the peso, 0.4% relative to the Australian currency, 0.3% versus the yuan and sterling, 0.2% vis-a-vis the euro, and 0.1% against the Swiss franc and loonie. The dollar firmed 0.2% against the kiwi and 0.3% versus the yen.

Ten-year German bund and British gilt yields jumped five basis points. Investors are pricing in a higher likelihood that the ECB and Bank of England start to throttle back their very accommodative policy stances later this year. The yield on 10-year Treasury futures furned two basis points, but the 10-year JGB yield remains unchanged.

West Texas Intermediate crude oil extended its recovery. Having closed on June 21st at $42.53 per barrel, oil went up another 0.8% overnight to $45.09. Comex gold dipped 0.2% to $1,246.30 per ounce.

Stocks rose around the Pacific Rim but are lower in Europe. Markets closed up 1.3% in Singapore, 1.1% in Australia, 0.6% in South Korea, 0.8% in New Zealand, and 0.5% in Japan, China and Hong Kong. Saturday is the 20th anniversary of the return of the former British colony, Hong Kong, to Chinese sovereignty, and Xi is traveling to Hong Kong to commemorate that event. Coincidentally, July 1, 1997 also marked the start of the Asian debt crisis, which was triggered by an unexpected devaluation of the Thai baht that day. Indonesian markets are closed.

Equities in Europe are down 0.7% in France, 0.6% in Switzerland, 0.4% in Greece, 0.3% in Germany and Spain, and 0.2% in Italy, but the British Ftse has firmed 0.2%.

Economic sentiment in Euroland shot up 1.9 points to a reading in June of 111.1, best in more than five years. Sentiment rose 2.4 points in Germany, 2.2 points in France, 1.6 points in The Netherlands but only 0.5 points in Spain and not at all in Italy.

Six German states reported positive month-on-month growth this month in consumer prices, but on-year inflation ranged from 1.4% in Bavaria to 1.9% in Hesse. GFK reported an unexpected 0.2-point further rise in German consumer sentiment to a reading of 10.6 in July.

Japanese retail sales sank 1.6% on month in May, reversing April’s 1.4% increase. The 12-month rise in sales fell back to 2.0% from 3.2% in April and 2.1% in March.

China’s first-quarter current account surplus was revised downward to $18.4 billion. That’s also down from $39.3 billion in the first quarter of 2016.

The Czech National Bank as expected kept its key two-week repo rate unchanged at 0.05%, the level since a reduction in November 2012. In early April, monetary officials had ended an intervention-imposed ceiling on the koruna of 27 per euro.

Spanish CPI inflation fell 0.4 percentage points to a 7-month low of 1.5% in June according to preliminary calculations.

South African producer prices rose 4.8% in the year through May. Icelandic consumer price inflation slowed to 1.5% in June.

Also in the year through May, retail sales climbed 2.4% in Sweden, down from a 3.4% 12-month rise in April, and 0.7% in Hong Kong, up from a dip of 0.1% posted in the year to April.

British M4 money growth decelerated to 6.7% in May. Mortgage approvals according to the Bank of England totaled 65,202 in the month.

Revised U.S. 1Q GDP and weekly U.S. jobless insurance claims get reported later this morning. At 20:00 EDT tonight, Trump’s travel ban affecting visitors from six Middle Eastern Muslim countries becomes effective.

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

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