Dollar Slides Close to Five-Week Low

July 17, 2020

Throughout the Covid-19 pandemic, the dollar has usually thrived on any worrisome developments in the outbreak but not lately. The trade-weighted dollar appears headed for its fourth consecutive weekly loss despite record daily increases over the past 24 hours in global new cases (253k) and new U.S. reported cases of 77k. In that span, 5,839 have died globally from the disease, including 959 in the United States. The intensifying epidemic throws a money wrench into plans to open up more economic activities. In the United States, the politicization of views on wearing masks in public continues.

On a related but somewhat separate matter, President Trump, who blames China for the pandemic, is said to be contemplating a full travel ban to the United States of all members of the Chinese Communist Party. Also a summit of EU leaders began today on designing a common pandemic recovery plan. The meetings are expected to stretch through next week.

The dollar fell overnight by 0.8% against the loonie, 0.4% relative to the euro and Swiss franc, 0.2% versus the Australian and New Zealand dollars and 0.1% vis-a-vis the yen. The dollar is unchanged against sterling and the yuan.

Stock markets around the Pacific Rim closed up 1.5% in India, 0.8% in South Korea and New Zealand and 0.5% in Hong Kong but down 0.3% in Japan, 0.4% in Indonesia and 0.2% in Singapore. The British Ftse and German Dax show gains of 0.6% and 0.5%, whereas markets in Spain and France so far have slipped 0.5% and 0.1%.

The 10-year British gilt yield rose 2 basis points, while its U.S. counterpart slid a basis point in futures trading. West Texas Intermediate oil fell 0.7%, but the price of gold is 0.2% higher.

CPI inflation in the euro area was confirmed at the preliminary estimate of 0.3% in June, up from a 2020 low of 0.1% touched in May but down from 1.4% in January. A 1.7% monthly rise in the energy component was the driving force behind June’s uptick. Core CPI inflation actually slid 0.1 percentage point to 0.8% at midyear and compared to 1.1% both in January and at mid-2019.

Construction output in the euro area, which plunged 15.7% in March and 18.3% in April, rebounded 27.9% during May as reopening got underway. Following a record 31% on-year decline in April, construction recorded an 11.9% 12-month rate of decline in May.

In a similar pattern, industrial orders in Italy soared 42.2% on month in May following consecutive drops of 4.1% in February, 26.4% in March and 31.6% in April. Orders in May were still 34.7% weaker than a year earlier.

OverĀ  the 12 months between mid-2019 and mid-2020, producer prices fell 5.7% in Portugal and by 0.3% in the Czech Republic. Austrian CPI inflation accelerated 0.4 percentage points to a 2-month high of 1.1% in June.

Spain experienced its first trade surplus in 74 months during May. The surplus of EUR 120 million compared to a deficit of EUR 2.11 billion a year earlier. Imports recorded a record on-year decline of 39.6% in May.

Singapore had its widest trade surplus so far this year in June, amounting to SGD 4.999 billion.

Chinese fiscal spending and government revenues dropped on year by 5.8% and 10.8% in the first half of 2020.

U.S. housing starts, building permits, and U. Michigan-compiled consumer sentiment will be released later today.

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

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