Weaker Turkish, South African and British Currencies

March 28, 2019

The Turkish lira slumped 5% against the dollar overnight when Turkish reserves data showed a large drop from previous intervention to support that currency.

Still no word from the South African Reserve Bank’s monetary policy review, but analysts aren’t anticipating a rate hike. However, there is concern ahead of Moody’s sovereign debt call on South Africa. That report is due tomorrow. The rand fell 1% versus the dollar overnight.

Sterling has also dropped 1.0%. It’s crunch time in the Brexit debate. Eight different votes yesterday on alternative Brexit plans failed to command sufficient support in parliament even though Prime Minister May has offered to resign after this stage of the Brexit process. Tomorrow is the original deadline, but it’s not even clear if a vote then will be allowed.

The dollar ahead of U.S. fourth quarter GDP figures is unchanged against the Swiss franc, Aussie dollar and kiwi, up 0.2% vis-a-vis the euro and loonie and 0.1% relative to the yuan but down 0.1% against the yen.

Sovereign debt yields fell overnight by a further 4 basis points in the U.K. 5 bps in Australia, 3 bps in Japan and one basis point in Germany and the United States. In some vulnerable Euroland economies, yields rose however, including by 3 basis points in Spain and Portugal and by 6 bps in Italy.

West Texas Intermediate crude oil still can’t find traction above $60 and instead sank 1.3%to less than $59 per barrel. Comex gold is 0.5% lower.

Japan’s Nikkei slumped 1.6%. In other stock markets in the Pacific Rim, share prices fell 0.9% in China and 0.8% in South Korea but rose 1.1% in India and 0.6% in New Zealand and Indonesia. European equities are mixed, with gains of 0.4% in the U.K., 0.3% in Switzerland and 0.1% in Germany but losses of 0.7% in Italy, 0.5% in Spain and 0.1% in France.

The weak inflation/softer global growth motif lies behind downward pressure on interest rates.

Regional CPI results from Germany point to a deceleration of inflation in March.

Icelandic PPI inflation fell to 5.6% in February from 8.4% in January and 11.7% as recently as November. Producer prices in Malaysia recorded a fourth straight year-on-year decline in February despite back-to-back monthly increases of 0.6%. South African PPI inflation, by contrast, rebounded 0.6 percentage points to 4.7% in February but was still some two percentage points lower than as recently as November.

Spanish CPI inflation accelerated 0.2 percentage points to a 4-month high in March but still remained quite low at 1.3%.

Economic sentiment data from the euro area revealed the ninth straight monthly deterioration in a row. The reading of 105.5 in March was weaker than forecast and down from 106.2 in February and 111.8 last June. Sentiment weakened in industry, services, and the retail sector. Only in construction did confidence improve. A separate indicator for business confidence posted the lowest reading in 28 months.

There are central bank policy review announcements due today in the Czech Republic and Mexico as well as in South Africa.

Euroland M3 money on average for December-through-February grew 4.1% on year. Private credit expanded 2.8% on year in February.

Portuguese consumer confidence dropped in March for a fifth straight month-on-month deterioration.

But business sentiment in South Korea rose 4 index points to a joint 8-month high in March.

In addition to 4Q GDP, today’s U.S. data menu includes pending home sales, the Kansas City manufacturing index, and weekly jobless insurance claims.

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


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