Softer Dollar as Second Week of July Draws to a Close

July 12, 2019

The dollar fell overnight by 0.5% against the Swiss franc, 0.4% versus the yen, 0.3% relative to the Australian dollar, and 0.2% vis-a-vis the loonie, peso, and sterling. EUR/USD is unchanged, however.

The S&P 500, Hang Seng, Nikkei, and German Dax are barely changed, but Chinese equities rose 0.5% after release of Chinese data showing a larger-than-forecast trade surplus and stronger new bank lending.

  • China’s trade surplus widened 25% on year in June to a 6-month high of $50.98 billion. Imports were 7.3% smaller than in June 2018, and the surplus was also almost twice the size of the January-May average surplus of $26 billion.
  • New yuan loans last month increased to a 3-month high of CNY 1.660 trillion from CNY 1.180 in May and CNY 1.02 billionĀ  in April. On-year M2 money growth was at 8.5% for a third straight month.

Three developments of interest overnight were

  1. Reports that Sino-U.S. trade talks have not made much progress.
  2. President Trump’s Labor Secretary resigned.
  3. The gist of comments from Fed officials were not exactly of a single voice, lending some ambiguity to how soon the FOMC might cut the fed funds target or even if such an action is highly probable.

The U.S. federal deficit in June narrowed sharply to $8 billion, but the nine-month shortfall so far this fiscal year of $747 billion was still 23% greater than a year earlier.

U.S. PPI inflation slid to a 29-month low in June of 1.7%, but core producer price inflation of 2.3% was unchanged from May.

Indian CPI inflation increased 0.1 percentage point to an 8-month high in June of 3.18%.

The monthly increase of Japanese industrial production in May was revised downward by 0.3 percentage points to 2.0%, and that was associated with a 2.1% decline from the May 2018 level. Output fell 2.5% in the first quarter but rose 0.6% in April. The inventory-to-shipments ratio climbed 1.7% on month and 4.5% on year in May, and capacity usage went up 1.7% on month.

Real GDP in Singapore tumbled 3.4% last quarter, a 13-quarter low, resulting in on-year growth of only 0.1%, which constitutes a 10-year low in that basis of comparison.

New Zealand’s manufacturing purchasing managers index recovered to a 2-month high of 51.3 in June from a low of 50.4 in May.

Turning to Europe, industrial production in the euro area rebounded 0.9% in May following back-to-back decreases of 0.3% in March and 0.4% in April. Output was 0.5% lower than in May 2018.

Spanish CPI inflation in June was confirmed at a 34-month low of 0.4%.

German wholesale price inflation slumped 1.3 percentage points in June to a 33-month low of 0.3%.

10-year U.S. and U.K. sovereign debt yields dipped one basis point each, while the 10-year Japanese JGB and 10-year German bund yields are two and one basis points higher.

Among commodities, WTI oil and Comex gold show overnight price gains of 0.4% and 0.2%.

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

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