Dollar Extends Rise Amid Pandemic-Related Uncertainty

April 16, 2020

Overnight dollar gains prior to today’s report on U.S. new jobless insurance claims range from 1.0% versus the peso, 0.5% against sterling, 0.4% relative to the Australian dollar, 0.3% versus the euro and kiwi, 0.2% against the Swiss franc, and 0.1% relative to the yen, yuan, and loonie.

In futures trading, the 10-year U.S. Treasury yield slipped two basis points further even as its German and British counterparts edged up a basis point.

In commodities, the prices of WTI oil  and Comex gold rose 1.0%  and 1.2%.

Share prices in the Pacific Rim fell 3.1% in Indonesia, 1.3% in Japan, 0.9% in Australia, 0.6% in Hong Kong, and most sharply by 7.1% in the Philippines where the central bank’s Monetary Board held an unscheduled meeting and cut the  policy interest rate by another 50 basis points.

Equity markets in Europe are up 1.3% in Italy and Switzerland, 0.9% in Germany, 5 bps in the U.K. and 4 bps in France.

The counts of reported global Covid-19 cases and deaths now stand at 2,097,851 and 135,692. The U.S. death total, 28,554, is about 7K above Italy’s second-highest total and 8.5 times greater than what China has reported. With U.S. officials beginning to talk about loosening restrictions on social distancing, there’s plenty of fear that this will be done before an effective testing plan is in place to make it safe. Japanese Prime Minister Abe broadened that economy’s lockdown to the whole nation.

U.S. new jobless insurance claims jumped another 5.245 million last week, which though shockingly high was only marginally above analyst expectations. That increase nevertheless brings the four-week total to a whopping 22 million first time claims.

In other released U.S. data, the Philly Fed manufacturing index, which had swung from 36.7 in February to -12.7 in March, fell 43.9 points further in April to a near four-decade low of -56.6. housing starts plunged 22.3% in March, even more than had been expected, while building permits dropped 6.8%, which was somewhat less than forecast.

In contrast, there were some better-than-forecast data releases overnight in figures that did not yet capture the full impact of activity shutdowns in late March.

  • Australia’s unemployment rate only rose 0.1 percentage point to 5.2% last month, and a net 5.9K jobs were added.
  • Industrial production in the euro area dipped 0.1% in February and averaged 0.75% more in January-February than its average level in the final quarter of 2019. Even so, output was 1.9% lower in the latest month than a year earlier.
  • Chinese house prices edged 0.1% higher in March. However, the on-year increase of 5.3% was the smallest in 21 months.
  • Dutch unemployment of 2.9% matched February’s level and was 0.6 percentage points lower than the recent high of 3.5% last August through November.
  • Canadian manufacturing sales increased 0.5% in February. Orders and inventories fell 0.5% and 1.0%.

A 0.3 percentage point slowdown in German CPI inflation to a 4-month low of 1.4% in March has been confirmed. The energy component dropped 2.2% on month and 0.9% on year. When excluding food and energy, core CPI inflation slipped 0.2 percentage points to 1.3%.

German wholesale price inflation dropped 0.4% on month and 1.5% on year, which was a 4-month low. Oil product prices were 10.4% below their year-earlier level.

The Swiss combined PPI/import price index in March fell 0.3% on month and 2.7% on year, a 4-year low. Import prices tumbled 5.2% on year, while domestic producer prices were 1.4% lower.

British same store sales were 3.5% lower than a year earlier in March after only a 0.4% on-year drop in February but still less than the 4.9% decline recorded between November 2018 and November 2019.

Norway’s NOK 2.475 billion trade surplus in March was considerably lower than the NOK 18.5 billion surplus a year earlier and the second weakest result in that whole time span. Norway is an energy exporter.

The central bank in the Philippines implemented a third interest rate cut since early February, reducing its policy rate by 50 basis points after an unscheduled meeting to 2.75%. Earlier cuts of 50 basis points and 25 bps were made on March 19 and February 6. The Monetary Board took today’s action to strongly encourage lending to various sectors amid the Covid-19 pandemic. Officials, who next meet May 21, are hoping a further rate reduction will not be necessary.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.


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