Awaiting FOMC Minutes and Assessing Data Out Earlier Today

February 20, 2019

The FOMC meeting in late January looms as an important inflection point in U.S. monetary policy. The statement released at that time deleted forward guidance that further increases in the target interest rate would be consistent with achieving the Fed’s mandates, instead spoke of patience while determining any future moves, and hinted at changes in the balance sheet reduction policy. Today’s published minutes of that meeting are eagerly awaited for clarification of the Federal Open Market Committee’s latest thinking and how united committee members are at this important juncture.

The dollar remains narrowly mixed, with overnight declines of 0.5% against the yuan and 0.2% versus the loonie, no net change relative to the euro or Swiss franc, and upticks of 0.3% against the kiwi and 0.2% vis-a-vis the yen, Aussie dollar, Mexican peso and sterling.

Stock market performances overseas have been mostly favorable, with share prices climbing 1.1% in Hong Kong, South Korea, and India, 1.2% in Taiwan, 0.6% in Singapore and Japan, 0.4% in New Zealand and 0.2% in China. Equities in Europe so far show advances of 0.7% in Switzerland, 0.5% in Spain, 0.4% in the U.K. and 0.3% in France and Germany.

Gold at $1,345 pr ounce is holding onto yesterday’s gain, but WTI oil has eased 0.8%.

Ten-year German bund, British gilt and Japanese JGB yields have each dipped a basis point.

Japan recorded its largest customs trade deficit in four years last month, a gap of JPY 1.415 billion compared to JPY 948 billion a year earlier as exports tumbled 8.4% on year. The seasonally adjusted deficit of JPY 370 billion was 67% wider than December’s deficit due to a 6.6% month-on-month decline in exports. Exports to China were 17.4% smaller than a year earlier.

New Zealand producer output price inflation slowed to 3.4% last quarter, but producer input price inflation accelerated to a 4-quarter high of 4.7% from 4.0% in the previous quarter.

Australia’s wage price index went up 0.5% last quarter, maintaining its on-year pace at 2.3% for a second quarter in a row. But such exceeds 2.1% in the year through 4Q17 and 1.9% in the year through the final quarter of 2016.

German producer price inflation edged down 0.1 percentage point to an 8-month low of 2.6% in January, having crested recently at 3.3% in September-October. Non-energy producer price inflation dropped 0.4 percentage points to just 1.2%.

South African CPI inflation fell to an 11-month low of 4.0% in January from 4.5% in December and 5.2% in November.

Portuguese PPI inflation was more than halved to 1.2% last month from 2.7% in December and 4.8% in each of the previous three months.

Polish PPI inflation in January of 2.2% was marginally above December’s downwardly revised 2.1% but well below 3.2% as recently as October.

Three economies reported that consumer confidence had weakened during February: Denmark, Turkey and the Netherlands. Danish consumer sentiment fell to a 2-month low of 3.3 from a reading of 3.9 in January. Turkey’s consumer sentiment index printed at a 3-month low of 57.8 versus 60.0 in November, and the Dutch index, which had been hovering at +23 last spring, slipped under zero to its first negative reading (minus 2) since February 2015. That’s down from +1 in January and +9 at the end of 2018.

There were 3.7% fewer construction orders in JapanĀ in December than a year earlier. Like housing starts, which were reported January 31, that’s a better year-on-year compoarison than in November.

The Confederation of British Industry monthly industrial trends survey showed an unexpectedly large rebound in its orders subindex, which rose 7 index points to +6 in February after dropping 9 points in January.

The Greek current account deficit in December of EUR 1.514 billion was the largest shortfall in 8 months and bigger than the December 2017 deficit of EUR 1.473 billion. The deficit rose 2.2 billion euros to EUR 5.3 billion in 2018 compared to the year before.

Westpac-Melbourne’s index of Australian leading economic indicators was unchanged in January following a 0.2% decline in December, further suggesting growth below trend in 2019.

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

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