Dollar Up and Stocks Down as Impeachment Inquiry Opens Against Trump

September 25, 2019

House Speaker Pelosi ended her previous resistance to calls for Trump’s impeachment, raising the political risks to both Democrats and Republicans. The United States and Great Britain, which led the free world’s fight against fascism in the 20th century, are now both enmeshed in constitutional crises.

Equities fell overnight by 1.3% in South Korea and India, 1.1% in Hong Kong, 1.0% in China, and 0.9% in Singapore and Japan. Share prices in Europe so far are down today by 1.7% in Italy, 1.6% in France, 1.3% in Switzerland and Spain, 1.2% in Germany and 0.9% in Great Britain.

Ten-year sovereign debt yields slipped two basis points in Japan and by a basis point in Germany, the U.K., and the United States.

Among commodity prices, WTI oil slumped 1.8%, and even gold dipped 0.2%.

The dollar appreciated today by 0.9% against sterling, 0.7% versus the peso, 0.5% relative to the kiwi, 0.4% vis-a-vis the yuan and euro, 0.3% against the yen, 0.2% versu the loonie and Australian dollar.

Three central bank reviews of monetary policy today resulted in no interest rate changes.

  • The Reserve Bank of New Zealand’s official cash rate had been cut by an out-sized 50 basis points at the prior meeting in August and by 25 bps in May. A statement from the central bank’s Monetary Policy Committee said that the current 1.0% official cash rate level is needed to ensure that inflation rises toward the target mid-point and that employment in New Zealand hovers around its maximum sustainable level. Officials noted that low global long-term interest rates, soft growth and low global expected inflation suggest that its interest rates will stay down for longer than thought previously, and they indicated a readiness to unveil more monetary stimulus in the future if needed.
  • The Bank of Thailand’s Monetary Policy Committee voted unanimously to retain a 1.50% policy interest rate. The first rate hike since 2011 had been engineered last December, only to be abruptly reversed eight months later at the committee’s previous meeting. Both changes were 25 basis points in size. The Committee released a statement announcing today’s decision that revised downward projections for growth and inflation and that forewarns that additional appropriate measures will be considered if necessary. The growth forecast was revised down to 2.8% this year followed by 3.3% in 2020. CPI inflation in 2019 is now seen undershooting the prior projection and target floor of 1.0%.
  • The Czech National Bank Board kept a 2.0% two-week repo rate. From a record low of 0.05% maintained for a considerable time, such had been lifted 45 basis points in 2007, 125 basis points last year and, most recently, by 25 basis points this past May.

Published minutes from the Bank of Japan’s late July policy review concluded that momentum in Japan toward an eventual rise of core inflation to 2.0% is being maintained by a positive output gap but also acknowledge that exports are showing some weakness and that housing and public investment are more or less flat. The central bank also published its three monitored measures of core inflation, showing some unexpected further deceleration in August. Finally, Japanese corporate service prices were unchanged last month from the month before, which kept their 12-month rate of increase unchanged at 0.6%. That’s half of last January’s on-year advance.

The British CBI’s monthly survey of U.K. distributive trades recovered in September to a 2-month high of minus 16 after spiking downward to -49 in August, the weakest level since late 2008. British mortgage approvals in August, according to BBA data, slipped 1.7% on month in August but were 8.6% above the year earlier level.

Spanish producer prices in August were 2.5% lower than a year earlier, which is their greatest 12-month decline in three years.

Malaysian CPI inflation of 1.5% in August was 0.1 percentage point above July’s result and the same as in June.

Austrian real GDP grew 0.3% in 2Q, the weakest quarterly gain since the winter of 2014-15, and that resulted in an 11-quarter low in on-year growth of 1.5%, down from 2.0% in the first quarter and 2.3% in the second quarter of 2018. Austrian industrial production rose 2.3% in the 12 months through July.

The Swiss ZEW expectations index, a gauge of investor sentiment toward the economy, strengthened to a 4-month high of -15.4 in September from a 7-month low of -37.5 in August.

French consumer confidence posted a ninth straight monthly improvement in September to its best level in 20 months. The advance reflects lower taxes.

New Zealand’s trade deficit of NZD 1.565 billion was nearly identical to its year-earlier level. The accrued deficit over the past dozen reported months was NZD 5.484 billion.

U.S. new home sales data get released later today.

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

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