Dollar Little Changed Overnight

June 17, 2020

The dollar is narrowly mixed this Wednesday. In spite of concerns that attempts to reopen social activities could intensify the Covid-19 pandemic, stock markets mostly rose, with the notable exception of a 0.6% slide in Japan’s Nikkei-225. New Zealand’s market shot up 3.9%, and European bourses show gains today so far of 1.3% in Switzerland, 1.2% in France, 0.8% in Germany and 0.7% in Great Britain.

The 10-year German bund yield rose six basis points. Other European sovereign debt yields are up less so. Among commodity prices, WTI oil and gold are down by 1.3% and 0.7%.

Fed Chairman Powell will be reprising his testimony on the economy today before the House Financial Services Committee. Yesterday at the Senate, he warned that recovery from the current recession is likely to be a drawn-out process and reaffirmed the Fed’s readiness to use all its tools to support that effort.

The National Bank of Poland retained a 0.1% benchmark interest rates. There earlier had been successive reductions of 50 basis points in March, 50 bps in April and 40 bps in May. Inflation has decelerated almost 2 percentage points in the past three months and is approaching the medium-term target. ” The measures undertaken by NBP reduce the risk of inflation falling below the NBP inflation target in the medium term and – due to their positive impact on financial situation of debtors – are conducive to enhancement of financial system stability.”

The Bank of Namibiaimplemented its fourth key rate reduction since February, a 25-basis point cut to a record low of 4.0% that brings the cumulative decline this year to 250 basis points. Inflation is now hovering near the medium-term target, and 4% is considered an appropriate rate level for mitigating the effects of the Covid-19 pandemic and for keeping Namibia’s currency steady against the South African rand.

Japan’s seasonally adjusted customs trade deficit narrowed sharply to JPY 601 billion in May as imports (-12.0% on month) fell twice as fast as exports. Compared to May 2019 levels, both exports and imports dropped somewhat more than 25% in unadjusted terms.

Construction output in Euroland posted back-to-back plunges of 15.7% in March and 14.6% in April. The on-year drop swelled from 4.1% in the first quarter to 28.4% in April.

New car sales in the European Union recorded successive on-year declines of 55.1% in March, 76.3% in April and 52.3% in May.

The second estimate of Euroland CPI inflation in May confirmed the preliminary indication that total consumer prices had dipped 0.1% on month and risen just 0.1% on year, which represents a 47-month low. Core CPI was flat on month and 0.9% on year. Energy fell 1.7% on month and 11.9% on year in May, while food costs were 3.4% greater than a year earlier.

British CPI inflation decelerated for a third straight month to 0.5% in May from 0.8% in April, 1.5% in March and 1.7% in February. Core CPI inflation in that span fell a half percentage point to 1.2%. Over the 12 months through May, producer output prices dropped 1.4%, while producer input prices sank 10.0%.

Italian industrial orders plunged by a record 32.2% on month in April and were 49% fewer than a year earlier.

Swedish seasonally adjusted unemployment increased 0.6 percentage points to 8.5% in May, and the 9.0% unadjusted jobless rate was 1.9 percentage points greater than in May 2019.

New home sales in Australia dropped 4.2% on month in May after declines of 23.2% in March and 1.1% in April. But the Westpac index of Australian leading  economic indicators broke a string of three straight monthly declines. Reserve Bank of Australia officials have verbally said that this year’s contraction of real GDP probably will not be quite as pronounced as projected earlier.

New Zealand’s first quarter current account surplus of NZD 1.557 billion was 2.2 times wider than a year earlier.

Later today, U.S. housing starts and Canadian consumer prices will be reported. Fed Chairman Powell testifies in the House of Representatives, and Copom, the monetary policy committee at the Central Bank of Brazil, is likely to cut its Selic interest rate.

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

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