Weaker Dollar as Trade Tensions Intensify

July 6, 2018

The dollar is down today by 0.6% against the euro and kiwi, 0.5% relative to sterling and the Australian dollar, 0.4% versus the Swiss franc, 0.3% against the loonie, and 0.2% versus the yen. The Chinese yuan edged down 0.1%.

Yesterday’s FOMC minutes were pretty much a non-event. Today’s monthly U.S. jobs data for June were mixed. The jobless rate increased 0.2 percentage points to 4.0%, a 3-month high. Broader measures of unemployment also backed up higher, and average hourly earnings growth failed to rise above May’s on-year 2.7%. However, 213K jobs were created, up from 144K in May and 175K in April.

New U.S. tariffs on Chinese imports went into effect today, which Beijing will match against the U.S. President Trump threatened a lot more tariffs, and China will match that, too. And so it goes, and so it goes.

The U.S. goods and services trade deficit narrowed $3 billion in May to $43.053 billion. The year-to-date deficit of $244.76 billion was 8% wider than a year earlier, nonetheless.

Pacific Rim share prices are ending the week on an up note. Stocks rose 0.7% in South Korea, 0.5% in China, 0.4% in Hong Kong, 0.9% in Australia and 1.1% in Japan. European stocks are little changed, and the U.S. S&P 500 has firmed 0.3% so far.

10-year sovereign debt yields dipped a basis point in the United States, Germany, the U.K., and Japan.

WTI crude oil advanced 0.9%. Gold is steady.

Like the U.S., Canada experienced a 0.2 percentage point rise in its jobless rate, which was 6.0% last month, and that was accompanied by a decent advance in employment, which rose 31.8K on month and 1.2% on year.

Canada’s trade deficit shot up sharply to C$ 2.77 billion in May from C$ 1.86 billion in April and C$ 1.02 billion in May 2017. Whereas imports climbed 1.7% on month, exports slipped 0.1%. The Canadian IVEY-PMI index rebounded to a 2-month high of 63.1 in June.

Australia’s Performance of Construction index fell 3.4 points to a 17-month low of 50.6 in June.

Japan reported several indicators.

  • Labor cash earnings in May were 2.1% greater than a year earlier in nominal terms. On a volume basis, the increase was 1.3%.
  • International reserves rose $4.27 billion in June to $1.259 billion. That was the largest rise in 3 months.
  • Real household spending dipped 0.2% on month but were 3.9% lower than a year earlier.
  • The June 1-20 customs trade surplus of JPY 213 billion was 59% larger than a year earlier.

The French current account deficit of EUR 2.917 billion in May was the widest in 16 months.

Italian retail sales rose by a greater-than-forecast 0.8% in May.

German industrial production, which had fallen 1.3% in April, roared back to a 2.6% advance in May and was 3.1% higher than a year earlier.

The British Halifax house price index only moved 0.3% higher in June, reducing its 12-month rate of increase to 1.8%, a 4-month low.

Austrian wholesale prices edged up 0.2% in June and accelerated to a 6.3% on-year advance.

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

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