Focus Shifting to Upcoming ECB and BOJ Monetary Policy Reviews

July 19, 2017

Yesterday’s story centered on the failed U.S. healthcare repeal and replace bill, which sent the dollar sharply lower.

The dollar today has declined a further 0.4% against the yen and Australian dollar, 0.3% relative to the loonie and kiwi, and 0.1% vis-a-vis sterling and the Swiss franc. But the dollar recovered 0.2% against the euro and 0.1% versus the yuan and peso. Investors are more guarded ahead of policy meetings at the Bank of Japan and European Central Bank. Neither of these Thursday announcements is expected to change existing monetary policy settings. However, there could be changes in the nuances of forward guidance. The Bank of Japan will be unveiling an updated Outlook of Economic Growth and Prices with new macroeconomic forecasts and a press conference by Governor Kuroda. ECB President Draghi also presides over a post-meeting press conference.

Equities appreciated 1.4% in China, 1.3% in Hong Kong, 1.1% in South Korea, 0.8% in India and Australia but just 0.1% in Japan. In European trading thus far, share prices have climbed 0.5% in France, 0.4% in the U.K. but only 0.1% in Germany. U.S. stocks hardly moved in the first half hour of trading today.

Ten-year sovereign debt yields slipped by a further 2 basis points in France, Germany and the U.K. and by a basis point each in Switzerland and Italy.

West Texas Intermediate oil rose 0.5% to $46.63 per barrel. Comex gold is 0.1% higher at $1,242.80 per ounce.

A new monthly economic assessment from the government of Japan was left unchanged from June’s upgraded view and stressed a better-looking dynamic concerning consumer spending.

Japanese machine tool orders were 31.1% higher in June than a year earlier. That’s up from a 24.5% rise posted in May but slightly less than April’s result.

Westpac’s index of Australian economic indicators weakened to a reading of -0.14 in June from -0.01 in May.

South Korean producer prices fell 0.4% on month in June and decelerated to a 2.8% 12-month rate of rise.

PPI inflation also slowed last month in Poland to 1.8% from 2.5% and in Portugal to 2.7% from 4.1%.

South African consumer prices edged up 0.2% on month in June but fell 0.3 percentage points to 5.1% in on-year terms.

U.S. housing starts increased more sharply than expected in June (8.3%) to a 4-month high and were even 2.1% greater than their year-earlier level. Building permits climbed 7.4% on month and 5.1% on year.

U.S. mortgage applications recovered 6.3% last week following a 7.4% drop the week before. The 30-year fixed mortgage rate stayed at 4.22%.

Canadian manufacturing sales posted a second straight 1.1% monthly  increase in May. Orders and inventories fell by 3.6% and 0.1%.

Construction output in the euro area dropped 0.7% in May, which was the second decline in three months. However, the on-year increase of 3% in April-May is stronger than the 1.8% advance recorded on average in the first quarter.

House prices in Euroland rose 0.4% on quarter and 4.0% on year in the first quarter of 2017.

India’s index of leading economic indicators rose 0.4% for a second straight time in June, but the index of coincident economic indicators fell 0.9% on top of a 1.7% slide posted in May.

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

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