Stronger Yen and Dollar ahead of U.S. GDP Figures

October 27, 2017

The earliest estimate of U.S. third-quarter GDP growth gets released shortly.¬†Forecasters anticipate similar growth to the 3.1% result in 2Q. The dollar meanwhile has continued to strengthen against the euro (0.3% overnight) in response to contrasting monetary policies. Trump is expected to replace Yellen with a more hawkish person to lead the Fed, while yesterday’s ECB press conference continued to stress the need for continuing significant monetary stimulus.

The dollar also climbed 0.4% against the Swiss franc and sterling, as well as 0.3% relative to the loonie, and 0.2% versus the Australian dollar, peso, and yuan. But the dollar lost 0.5% versus the even stronger Japanese yen.

Japan’s Nikkei advanced 269 points today, or 1.2%, and closed above the 22,000 level. Stocks in other Pacific Rim markets went up 0.9% in Singapore, 0.6% in South Korea, 0.7% in Hong Kong and 0.3% in China but slid by 0.2% in Taiwan and Australia. In Europe, share prices slumped 1.1% in Spain but have risen 0.8% so far in France, 0.7% in Germany and 0.3% in Great Britain.

Industrial metal prices slumped pretty significantly today. Gold and oil have dipped 0.1%.

The ten-year British gilt and German bund yields slid two and one basis points.

The Bank of Russia has cut its key interest rate by a further 25 basis points to 8.25% and released a statement implying the likelihood such will decline even more in the future.

Chinese industrial profits were 28% greater in September than a year earlier. There’s been a 23% increase in earnings over the first nine months of the year versus an 8.5% increase in full-2016.

Japanese core CPI inflation, which excludes fresh food costs, stayed at 0.7% last month, but the seasonally adjusted core index was unchanged from the August level. Service sector consumer price inflation was at zero. Overall Tokyo CPI inflation swung from +0.5% in September to -0.2% in October.

German import price inflation jumped 0.9 percentage points to a 4-month high of 3.0% in September, reflecting an acceleration of the energy component. Non-energy import price inflation dipped to 1.6%. Export prices were 1.7% higher than in September 2016.

Australian PPI inflation slowed for the first time in a year. In 3Q17, producer prices rose 0.2% on quarter and registered an on-year increase of 1.6% versus 1.7% in the second quarter.

Icelandic CPI inflation accelerated a half percentage point to a 6-month high of 1.9% in September.

Swedish retail sales rose on month for a third straight time and were 4.6% greater in October than a year earlier. Spanish retail sales grew 0.4% on month and by 2.1% on year in September. On-year growth in Irish retail sales of 1.2% in September was slower than in either July or August.

French consumer confidence weakened to a six-month low in October. Finnish consumer sentiment also edged somewhat lower this month. But in Sweden, consumer confidence jumped 3.5 points to a 5-month high of 105.3.

In addition to GDP data, scheduled U.S. releases today include the employment cost index and the Reuters/U. Michigan October consumer sentiment index. Colombia’s central bank is holding a policy review today.

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

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