Dollar Slightly Firmer as Markets Await Speeches from Powell and Other Central Bankers

August 23, 2019

The dollar climbed overnight by 0.4% against the Swiss franc and sterling and by 0.2% relative to the yen, euro and loonie. It’s unchanged on balance against the yuan but touched a new 11-year intra-day high of 7.0987 against the Chinese yuan. The peso and Australian dollar are unchanged against the greenback, while the kiwi edged up 0.1% after Reserve Bank of New Zealand Governor Orr discouraged speculation that unconventional monetary tools might be utilized.

Federal Reserve district presidents from Philadelphia and Kansas City expressed a predisposition for a greater pause before cutting the fed funds target additionally. Dallas Fed President Kaplan’s comments suggest he is agnostic on the timing, liking to wait but not ruling out another move next month.

Today’s menu of speeches from the Jackson Hole Symposium features Fed Chair Powell and Bank of England Governor Carney. Other Fed officials to speak include Bullard, Kaplan and Mester.

Share prices in the Pacific Rim closed up 0.6% in India, 0.5% in Hong Kong and China, and 0.4% in Japan but down 1.1% in New Zealand and 0.6% in Singapore. European bourses have risen so far today by 0.8% in the U.K., 0.7% in Switzerland, 0.6% in Spain, 0.5% in France, 0.4% in Germany but just 0.1% in politically troubled Italy.

Ten-year sovereign debt yields are up 3 basis points each in the U.S. and U.K. today but steady in Germany. The 10-year Japanese JGB yield firmed a basis point.

Prices for gold and oil have edged marginally lower.

Friday brought word of another central bank rate cut. This time it involved the Central Bank of Sri Lanka. The rate cut size was 50 basis points each to the key deposit rate (now 7.0%) and lending rate (now 8.0%). The cut follows a similarly sized reduction engineered in May, which together almost offset a duo of rate hikes in July 2016 and November 2018 that totaled 125 basis points in the deposit rate. According to a released statement, the lull in Sri Lankan growth was exacerbated by this year’s Easter Sunday terrorist massacre and global uncertainties related to trade. Many other central banks have also relaxed monetary policies recently, and “inflation is expected to remain in mid-single digit levels in the medium term.”

Japanese total CPI inflation dropped 0.2 percentage points to a 5-month low in July, while core CPI that excludes fresh food only remained at June’s 23-month low of 0.6%. The 12-month increase in energy prices dropped to 0.6% from 4.9% last January.

Mexican GDP growth last quarter got revised down to zero percent, resulting in a 0.8% decline compared to the second quarter of 2018. Over the previous year through 2Q18, real GDP had expanded 2.6%.

Retail sales in New Zealand increased 0.2% last quarter down from 0.7% in the first quarter of the year. Sales were 2.9% greater than a year earlier.

U.S. IHS-compiled purchasing managers survey results for August show little activity. The manufacturing index slid a half index point to a sub-50 reading of 49.9, and services relapsed 2.1 points to a three-month low 50.9. The composite PMI was also 50.9, down from 52.6 in June.

CPI inflation in Singapore slowed to 0.4% in July, a 6-month low.

On-year growth in Austrian industrial production reverted to the black in June, but at 1.3%, the increase was down from ones of 3.8% in April and 7.7% in March.

Still ahead: U.S. new home sales and China’s index of leading economic indicators.

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

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