Brexit Exerting Intensifying Toll on Sterling

July 29, 2019

The pound fell 1.0% overnight against the dollar and euro. In British domestic trading, the FTSE-100 has jumped 2.0%, while the 10-year gilt yield dropped five basis points. The case of sterling exemplifies the fact that so long as global inflation remains subdued, currency depreciation is more desirable economically and politically than currency appreciation.

Against other key currencies, the dollar rose 0.2% versus the kiwi, yuan, and peso, held steady relative to the euro and Australian dollar, and dipped 0.2% against the loonie and 0.1% versus the yen.

Equity markets in selected Asian economies closed down 1.8% in South Korea, 0.7% in Hong Kong, 0.5% in India, 0.4% in Indonesia, and 0.2% in Japan. In contrast, share prices rose 0.5% in Australia and New Zealand and presently are showing gains of  0.4% in Germany and 0.2% in France. U.S. stocks are up somewhat as well.

West Texas Intermediate crude oil advanced 1.0%, and the price of Comex gold has risen 0.2%.

An interest rate cut is widely expected Wednesday from the Federal Reserve. The Bank of Japan and Bank of England also hold monetary policy reviews this week.

Being the bridging week between July and August, this week is also chocked full of scheduled data releases, but today’s menu has been light.

Japanese retail sales in June recorded the second smallest year-on-year rise so far this year, a gain of 0.5% versus 1.3% experienced in May. Sales were unchanged from their May level in seasonally adjusted terms.

Producer prices in Singapore were 5.2% lower in June than a year earlier, and that’s the biggest 12-month decline there since August 2016. The drop was also more than twice that of 2.5% in May.

South African M3 money and private credit posted  year-on-year gains in June of 8.99% and 6.91%.

Italian producer prices fell 0.3% on month and posted the smallest 12-month increase (0.9%) in 66 months.

The preliminary Spanish CPI estimate shows a monthly drop of 0.6% but a marginally higher 0.5% year-on-year rate of increase in June after May’s 33-month low of 0.4%.  Spanish retail sales edged 0.1% higher on month in June, leaving on-year growth in sales at a 2-month low of 2.4%.

Finnish consumer confidence, which had dropped sharply from a reading of -1.8 in May to one of -4.6 in June, rebounded to -3.9 in July.

Austria’s manufacturing purchasing managers index fell 0.5 points to a fourth straight sub-50 reading of 47.0 in July. That result signifies the most rapid rate of contraction in 57 months. The PMI’s cyclical high had been 64.5 in December 2017.

Underlying British M4 money growth slowed 0.8 percentage points to just 2.0% in June. But mortgage applications totaling 66.44k were greater than forecast, and net consumer credit slightly topped 1.0 billion pounds.

The Dallas Fed publishes its monthly survey of manufacturers later today.

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


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