Softer Dollar and Yen

January 23, 2019

The yen fell 0.4% against the dollar overnight on data news and the Bank of Japan’s downward revision of projected core inflation for fiscal 2018, fiscal 2019, and fiscal 2020.

  • The Bank of Japan left its monetary policy unchanged and also revised growth downward in the current fiscal year ending March 31 . BOJ Governor Kuroda in press conference expressed concern that prolonged global trade conditions would be bad for everyone but hope that a better resolution will be found.
  • Despite a 1.9% rebound in industrial production in November, Japan’s all industry index slipped 0.3% due to declines of 1.0% in service sector activity and 0.3% in construction.
  • Japan’s customs clearance trade balance posted another deficit last month equal to JPY 184 billion seasonally adjusted and JPY 55 billion not adjusted. Exports were 3.8% lower than in the final month of 2017. On a calendar year basis, the deficit swung to a JPY 1.203 trillion deficit in 2018 from surpluses of JPY 2.907 trillion in 2017 and JPY 3.994 trillion in 2016.

Sterling rose 0.9% to a 2-month high against the dollar on mounting speculation that the U.K. will not leave the EU without some sort of deal regarding its future relationships with the rest of Europe.

The dollar also lost 0.6% against the kiwi overnight. New Zealand consumer prices rose just 0.1% on quarter in 4Q, which was the smallest quarterly advance since the final quarter of 2017. Thus, on-year CPI inflation stayed below 2.0% at an unchanged 1.9%.

The dollar slipped but less sharply against the euro, Swiss franc, Aussie dollar, yuan and peso. President Trump is going forward with his State of the Union address next Tuesday, and there has been little progress to end the ongoing and increasingly damaging record-long government shutdown.

U.S. stocks opened sharply higher on good corporate earnings news, but the DOW less than 2 hours into the trading day was already trading 181 points below its intra-day high, as it’s become increasingly hard for investors to separate dysfunctional federal politics from the U.S. economic outlook.

Share prices dropped 0.9% in India, 0.7% in Singapore, 0.5% in South Korea, and 0.1% in Japan. The British Ftse has fallen 0.5%.

Among 10-year sovereign debt yields, the U.S. treasury is up 2 basis points by the German bund is down a basis point.

French business sentiment in manufacturing and retail remained steady in January after weakening in December. Service sector sentiment rose a point, reversing half of its December decline.

The Confederation of British Industry’s monthly industrial trends index dropped 9 index points to a -1 reading in January. This measure of orders had been at +13 in June, and this was the largest month-to-month drop in this data series since the middle of last year.

The Richmond Fed manufacturing index rebounded six index points to minus 2 but remains 16 points below its November reading and 31 points lower than its 2018 high seen in September.

Consumer confidence in the euro area ticked 0.4 points higher in January to a reading of minus 7.9, but December’s reading got revised lower by 2.1 points.

The FHFA house price index rose 0.4% in November, nudging its 12-month rate of increase up 0.1 percentage point to 5.8%.

Canadian retail sales sank 0.9% in November, trimming its 12-month increase to a mere 0.5%. Excluding autos, retail sales were 0.1% below their year-earlier level.

January consumer confidence readings for Denmark and Turkey were 60% and and 20% lower than July 2018 readings taken six months earlier.

Year-on-year consumer price inflation in December printed down 0.7 percentage points in South Africa at 4.5% and 0.2 percentage points higher at 0.5% in Singapore.

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


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