Euro Sinks 0.6% to 16-Month Low of $1.1240
November 12, 2018
The optics went very poorly for U.S. President Trump at centennial WWI Armistice observances in Paris, where he had to scrap a cemetery visit, was left out of other shared activities, heard a sharp rebuke of nationalism by French President Macron, and endured a stream of troubling political developments happening back in Washington.
Currency markets today have paid little attention to Trump’s difficulties and instead focused on European news, namely the mounting likelihood that British Prime Minister May’s Brexit proposals isn’t going to fly. British remainers and leavers both dislike her plan, and the other EU leaders aren’t accepting it either. Brexit and the new Italian government’s defiance of euro area fiscal guidelines pose big challenges to the integrity of the joint currency experiment.
The dollar shows gains of 0.7% against sterling, 0.6% versus the euro, 0.4% vis-a-vis the Swiss franc, 0.2% relative to the Australian dollar and 0.1% against the yen. The yen and kiwi remain steady.
Continuing euro area tensions can be seen in divergent movements between the 10-year German (-3 bps), Dutch (-2 bps) and French (-2 basis points) sovereign debt yields and increases of 4 basis points and 1 bp in their Italian and Greek counterparts. The 10-year British gilt yield has fallen 5 basis points, while the 10-year U.S. Treasury and Japanese JGB yields are each unchanged.
Some of the dollar’s strength has been attributable to a bounce in the price of oil. WTI crude is 0.4% firmer, whereas Comex gold has slipped 0.1% lower.
Share prices in Europe so far today have dropped 0.8% in Germany and Greece, 0.6% in Italy, 0.4% in Switzerland, 0.2% in France and 0.1% in the U.K. and Spain. Stocks in the Pacific Rim fared better, rising 1.2% in China, 0.3% in Australian and New Zealand, and 0.1% in Japan. There were big declines of 1.7% in Indonesia and 1.0% in India’s market.
Ireland’s construction purchasing managers index fell to a 43-month low of 52.8 in October from 56.2 in September, 58.3 in August and 61.8 in May.
Domestic Japanese corporate goods prices rose 0.3% last month, and the 12-month rate of increase printed at 2.9% versus 3.0% in each month of the third quarter. Import price inflation has slowed to 9.5% in October from 10.8% in September and 12.2% in August.
For the first month so far in 2018, Japanese machine tool orders were less than a year earlier. There was a 1.1% on-year drop in October versus increases of 2.9% in September, 11.4% in June, 28.1% in March and 48.8% in the first month of the year.
Turkey’s recorded a second successive current account surplus in September ($1.83 billion in size), but accrued a year-to-date deficit of $30 billion, which was only slightly narrower than the January-September 2017 deficit of $31.3 billion.
Italian industrial production dipped 0.2% in September, but the 12-month change (+1.3%) reverted to positive ground after back-to-back on-year declines of 1.3% in July and 0.8% in August.
Over the 12 months through October, consumer prices rose 4.3% in Romania but just 0.8% in Denmark. Romanian industrial production fell 1.6% in October and recorded the smallest on-year increase (4.0%) since June.
Retail sales in Singapore dipped 0.4% in September but posted their first on-year advance (1.9%) in three months.
America is observing Veterans Day today, but stock markets will be open.
Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Euro, Italian industrial production, Japanese PPI, Turkish current account