Sterling Looking a Touch Fragile

December 23, 2019

The weakest major currency this Monday has been sterling, which has slipped below $1.30 and by 0.4% in all from Friday’s close. The U.S. dollar otherwise has been mixed, dipping 0.2% against both the Australian and New Zealand dollars and 0.1% relative to the yen and euro. The dollar alternatively shows slight gains of 0.2% versus the peso and 0.1% vis-a-vis the loonie and yuan.

Today’s biggest policy news came from China with the announcement of import tariff cuts on a multitude of goods including foods, pharmaceuticals and high tech parts. These will go into effect on January 1, 202o. China’s stock market fell 1.4% today.

Movements in other equity markets have been comparatively tame. Share prices are up 0.6% in New Zealand and 0.5% in Australia and Great Britain but are down 0.3% in Spain and 0.1% in India.

The ten-year British gilt and U.S. Treasury yields have edged 2 and 1 basis points lower, while their German counterpart firmed a basis point. Among commodities, the price of WTI oil is 0.4% softer, while that of gold is 0.4% higher.

After their quarterly review of monetary policy, officials at the Central Bank of the Republic of China (Taiwan) announced a unanimous decision not to change the 1.375% discount rate, which has prevailed since a string of four consecutive 12.5-basis point reductions after the meetings from September 2015 through June 2016. Policymakers released a statement that highlights a slightly negative output gap, steady and respectable growth in domestic demand, and low and stable inflation prospects.

In November, German import prices recorded their slowest year-on-year decline (2.1%) in six months. Import prices excluding crude oil and mineral oil products also fell 2.1% over the past 12 reported months. Export prices were 0.1% lower than their level a year earlier.

The November report on U.S. durable goods orders was disappointing. A  rise had been forecast in total orders, but such instead fell 2.0% on month and 5.7% on year. Non-defense capital goods orders, excluding aircraft, rose 0.1% but were still 1.1% lower than a year earlier. On a brighter note, the Chicago Fed National Activity index swung from an October reading of -0.76 to 0.56 in November, its most positive value since February 2018. Also, new home sales nationwide increased 1.3% on month and by 16.9% on year in November.

The recent sluggish Canadian growth extended into the fourth quarter. Following monthly changes of 0.0% in July, 0.1% in August and again in September, real GDP slid 0.1% in October, its first negative monthly change since February. Industrial production dropped 0.8% on month and 2.7% on year in October. The energy sector was 3.4% smaller than a year earlier, and retail recorded its largest month-on-month decline (1.1%) since March 2016.

Japan’s index of leading economic indicators for October was revised 0.2 points below its preliminary estimate to 91.6, lowest in 119 months. The index of coincident economic indicators had a slight upward revision, but officials still characterized the CEI’s trend as “worsening.”

Australian on-year growth in private credit of 4.4% and M3 money of 4.2% were each larger in November than seen in October.

Singaporean CPI inflation accelerated 0.2 percentage points to a 5-month high of 0.6% in November. Finnish producer prices that month fell 0.2% from October and by 0.8% compared to a year earlier.

Austria experienced a EUR 1.416 billion current account surplus in the third quarter of 2019, 45% wider than a year earlier. Austrian industrial production rose 0.7% in October, the most since June but not enough to produce a year-on-year advance.

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

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