Mixed Dollar
November 16, 2018
The exit of British officials protesting the Brexit deal terms did not snowball, and Prime Minister May remains in power for now. Sterling rebounded 0.3% against the dollar and euro. The Ftse has lost 0.3%, and the 10-year British gilt yield climbed four basis points.
The dollar also fell 0.3% against the yen and 0.1% versus the loonie but has risen 0.4% vis-a-vis the kiwi, 0.3% against the peso and Australian dollar, 0.2% versus the yuan and 0.1% against the Swiss franc. The euro moved in lockstep with the dollar.
Share prices in the Pacific Rim fell 0.6% in Japan and 0.3% in Taiwan but rose 1.0% in Singapore and Indonesia, 0.6% in India, and 0.4% in China and Hong Kong. Stocks in Europe are down 0.3% in Spain and the U.K. and 0.5% in Greece but up 0.5% in Switzerland, 0.2% in Italy and 0.1% in Germany.
Ten-year sovereign debt yields fell 4 basis points in Italy, 2 bps in Greece and 1 bp in Japan but rose 4 bps in the U.K. and 1 bp in Germany. The ten-year U.S. Treasury is steady.
WTI oil rebounded by a further 1.6%, and gold has edged 0.1% higher.
The Bank of Mexico raised the overnight interbank rate by another 25 basis points, citing significant peso depreciation since the last policy review, concerns regarding the incoming administration’s policy intentions, above target inflation, indications of higher expected inflation, recent downgrades by some ratings agencies of Mexico’s debt rating outlook, and likely future increases in global interest rates. Mexico’s benchmark interest rate now becomes 8.0%. It had earlier been raised by 250 basis points in 2016, 150 bps in 2017, and this year by 25 basis points each in February and June. The latest vote to tighten monetary policy drew one dissent favoring a 50-basis point hike rather than the Governing Board majority’s preference for another 25-bp incremental rise. The last 50-basis point hike was done in February 2017, and the dissent suggests that more increases shouldn’t be ruled out, especially since officials aren’t predicting lower inflation next year.
Minneapolis Federal Reserve President Kashkari reiterates his view that there is not a need to raise the federal funds target soon. He noted continuing underemployment.
German wholesale price inflation accelerated a half percentage point to a 2018 high so far of 4.0% in October, reflecting an increased on-year 23.8% rise in mineral fuel costs.
CPI inflation in the euro area was confirmed at 2.2%, most since the final month of 2012, but non-energy CPI held steady at 1.3% for a third straight month in October. The 12-month rate of energy price inflation of 10.7% was more than three times greater than its increase of 3.0% in the year through October 2017.
Italian CPI inflation of 1.6% matched the preliminary indication for October. Inflation there had fallen to 1.4% in September from this year’s high of 1.6% first hit in August. As recently as April, inflation was merely 0.5% in Italy.
In other released Italian data, industrial orders sank 2.9% in September, resulting in just a 0.9% 12-month rate of increase, and the trade surplus slipped to an 8-month low of EUR 1.274 billion in September, compared to EUR 2.49 billion in August and EUR 4.26 billion in September 2017.
Austrian CPI inflation of 2.2% in September, Cypriot CPI inflation of 1.9% in October, and Czech producer price inflation of 3.9% in October were each above levels in the prior month.
Two Southeast Asian economies reported slower growth in the third quarter.
- Although up 1.6% on quarter, Malaysian GDP posted a year-on-year 4.4% advance, down from 4.5% in 2Q and 6.2% in the third quarter of 2017. Growth in the latest quarter was dampened by a negative contribution from net exports.
- GDP growth in Hong Kong slipped to 2.9% last quarter, a 2-year high, from 3.5% in 2Q and 5.4% in the final quarter of 2017. In quarter-on-quarter terms, GDP edged only 0.1% higher last quarter after a 0.2% dip in 2Q.
Singapore’s trade surplus widened to a 2-month high in October but, at SGD 4.521 billion was well short of August’s SGD 6.757 billion level.
Turkish industrial production contracted 1.1% in August and another 2.7% in September.
The New Zealand manufacturing purchasing managers index rose 1.8 points in October to a 5-month high of 53.5.
U.S. industrial production, capacity utilization, Kansas City Fed manufacturing index, and Treasury-compiled capital flow data get reported later today. So will Canada’s monthly survey of manufacturing sales, orders and inventories.
Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Mexico, euro area CPI, U.K. Prime Minister May
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