Dollar Down as Trump Mulls Declaring Emergency to Fund Wall

January 7, 2019

The dollar began the first full week of 2018 edging moderately lower against most other major currencies. The political stalemate over funding a southern border wall is adding to investor uneasiness as the president claims he doesn’t need congregational approval to fund building a wall and could alternatively just declare an immigration emergency.

Equity markets had overnight rallied in Asia, including advances of 2.4% in Japan, 2.2% in Taiwan, 1.3% in South Korea, 2.2% in Taiwan and 0.7% in China. But the British Ftse, Paris Cac and German Dax each show losses of 0.6%.

Ten-year sovereign debt yields are down for basis points in the U.K., 3 bps in the U.S., and a single basis point in Germany but recovered 3 bps to -0.03% in Japan.

WTI oil jumped 2.1% and is close to $49 per barrel. Gold firmed 0.6%.

Japan’s service-sector and composite purchasing manager readings fell to 3- and 4-month lows in December of 51.0 and 52.0.

The Australian manufacturing PMI compiled by AIG dropped 1.8 points, moving under the no-change threshold of 50 to a 26-month low of 49.5 in December.

Sweden’s service-sector PMI slumped back 4.5 points to a 2-month low of 56.4.

December’s global composite purchasing managers index, jointly compiled by JP Morgan and IHS, fell a half point to a 27-month low of 52.7 in the final month of 2018.

A 3.2% monthly slump in German export orders caused overall factory orders in that economy to drop by a greater than expected 1.0% in November. Orders from other euro area members crashed 11.6% in a particularly ominous development. Total industrial orders were 4.3% lower than a year earlier.

Two other German economic data releases were more encouraging. Retail sales climbed 1.4% in November, the biggest month-on-month rise in over a half-year, but such were only 1.1% greater than the November 2017 level. Secondly, Germany’s construction purchasing managers index rose 2.0 points in December to a 7-month high of 53.3. Construction has been Germany’s best-performing sector.

The Sentix measure of investor confidence toward the euro area recording a second straight sub-50 reading. At -1.5 in January, such constituted a 49-month low.

Retail sales in the euro area increased 0.6% on month in November, matching October’s month-on-month rise, but sales volume was merely 1.1% greater than a year earlier.

Austrian wholesale price inflation was slashed in half to 2.2% in December.

Chinese foreign exchange reserves rose $11 billion last month due a valuation change in dollar/yuan. For 2018 as a whole, reserves decreased $67.2 billion in contrast to a $129.4 billion advance during 2017.

On-year growth in Japan’s monetary base, over which the Bank of Japan exerts most direct control, has slowed from 34.0% in 2015 to 25.0% in 2016, 17.0% in 2017, 7.3% in 2018 and 4.8% last month. The Bank of Japan’s balance sheet actually contracted a bit last month and recorded only a 10.7 trillion yen rise in 2018 versus an increase of JPY 44.9 billion in 2017.

Japanese motor vehicle sales were 4.4% lower in December than a year earlier.

Indonesian consumer confidence improved to a 6-month high in December.

ISM reports the U.S. non-manufacturing purchasing managers index later today.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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