Dollar Broadly Stronger… Gold and Global Bonds Down

April 25, 2018

The Mexican peso extended its recent swoon, falling 1.0% against the dollar and moving past the 19 per USD threshold. U.S./Mexican relations appear headed for another dive, as Lopez Obrador, the former Mexico City mayor and a populist, retained a huge lead in presidential election polls. The election is just over two months away. It’s hard to imagine NAFTA surviving if Obrador wins as now seems inevitable.

The U.S. dollar also climbed overnight by 0.5% against the kiwi, 0.4% relative to the loonie, Aussie dollar, and Swiss franc, 0.3% versus both the yen and euro, and 0.2% vis-a-vis the yuan and sterling. Dollar/yen reached an 11-week high.

Dollar demand is being fed by higher long-term U.S. Treasury yields. The 10-year note moved above the key 3.0% level. Ironically, rising U.S. long-term interest rates are also lifting the sovereign debt yields of other economies, but that correlation isn’t stemming the dollar’s climb. The 10-year Treasury yield is 2 basis points higher today, but so is the comparable British gilt yield. And 10-year German bund and Japanese JGB yields are a basis point firmer.

Comex gold, which tends to move inversely with the dollar, fell 0.6% so far today to a five-week low. West Texas Intermediate crude oil edged 0.2% higher to $67.83 per barrel.

Following yesterday’s plunge in U.S. share prices, stocks dropped 2.5% in Indonesia, 0.6% in Hong Kong and China, 0.5% in Singapore, but only 0.3% in Japan. Intensifying selling pressure in Europe ahead of tomorrow’s ECB policy meeting has seen stocks drop 1.9% in both Germany and Greece, 1.1% in Italy, 0.9% in France, and 0.7% in the U.K., Switzerland, and Spain.

Markets in Australia and New Zealand were closed Wednesday for Anzac Day, which commemorates soldiers who sacrificed their lives.

Turkish monetary policy was tightened at the latest review. While leaving the one-week repo rate unchanged at 8.0% and the overnight funding/borrowing rate corridor unchanged at 9.25% – 7.25%, Turkish central bank officials raised the late liquidity window lending rate by 75 basis points to 13.5%. That was the first change in any of its rates since January 2017 when the regular overnight marginal funding rate was lifted to 9.25% from 8.5%. A statement from the central bank notes elevated inflation, expected inflation, and import price pressure.

The Central Bank of Hungary‘s Base Rate and overnight collateralized lending rate was kept steady at 0.90%, its level since a 15-basis point reduction in May 2016. A statement from the Monetary Council affirms that an accommodative policy stance continues to be necessary in order to achieve Hungary’s inflation target in a sustainable way by the middle of next year.

Japan’s all industry index, a supply-side monthly gauge of GDP,┬árose 0.4% in February, but the 12-month rate of increase dropped from 1.8% posted in both January and the final quarter of 2017. On-year growth of 0.8% in service sector activity and 1.6% in construction were each the lowest since last September. Industrial production was only 1.6% greater than a year earlier, its smallest rise in at least a year.

French consumer confidence unexpectedly ticked a point higher to 101 in April, the best reading since 104 in January.

South Korean consumer confidence weakened to an April score of 107 from 108.1 in March and 112.0 last November.

Investor sentiment toward the Swiss economy measured by the ZEW expectations index sank another 9.5 points to a reading in April of 7.2, lowest since October 2016.

Spanish producer price inflation stayed level at 1.3% in March.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.


Tags: , , , ,


Comments are closed.