A Relatively Steady Dollar This Monday
July 20, 2020
This will be a light week from a data release standpoint, but many other factors are vying for investor attention as the period commenced. European Union leaders are in their fourth day of talks to find common ground on shared fiscal support against the Covid-19 recession. The U.S. congress returns from two weeks of recess to hammer out a new stimulus package and will hear an update on the status of vaccine development. Many more corporations will be reporting second quarter earnings and revenues. Over the past 72 hours, global coronavirus cases and deaths climbed by 610k and 16k, respectively, and the United States accounted for 31% and 13.6% of those totals. By Wednesday, the U.S. case count will surpass 4.0 million, and deaths will be near to the 145k level. U.S.-China relations remain very strained. Just 15 weeks remain before the U.S. election, and time is running short as well for Britain to secure any kind of post-Brexit trade arrangement with the European Union.
Euroland’s seasonally adjusted current account surplus collapsed to a 91-month low of EUR 7.96 billion in May from EUR 14.4 billion in April, EUR 27.4 billion in March and EUR 40.2 billion in February. On an unadjusted basis, there was a deficit of EUR 10.51 billion in May versus a surplus of EUR 1 billion a year earlier, and the surplus of EUR 264 billion experienced over the last twelve reported months equaled 2.2% of GDP.
Japan’s seasonally adjusted customs trade balance was in deficit during June for a fourth straight month and the fifth time so far this year. June’s shortfall totaled JPY 424 billion. The unadjusted deficit of JPY 269 billion compares with a surplus of JPY 588 billion in June 2019. Export volumes were down 27.1% on year compared to a 0.8% dip in import volumes.
German producer prices were unchanged on month and 1.8% lower on year in June, which was a tad greater than the projected 12-month rate of decline. Non-energy PPI inflation was negative for a third straight month.
In July, consumer confidence rose 1.0 points in Ireland to a 4-month high of 62.6 but still well under January’s reading of 85.5. Belgian consumer confidence edged down a point to a 2-month low of -20, which was also 16 points below the 2020 high hit in February.
Irish GDP growth in the first quarter was revised to a quarterly increase of 1.2% and a year-on-year rise of 5.1%, which was the smallest 4-quarter advance in a year. Ireland’s current account swung from a EUR 10.99 billion surplus in the first quarter of 2019 to a deficit of EUR 14.56 billion one year later.
Italy’s current account surplus in May of EUR 2.27 billion was 39% smaller than a year earlier.
Portugal ran a seventh straight monthly current account deficit in May and, at EUR 1.81 billion, such was 9.3% wider than a year earlier.
Hong Kong unemployment rose another 0.3 percentage points in June to 6.2%. This was its highest level since the start of 2005 and 2.5 percentage points above February’s reading.
The on-year change in Polish industrial production swung from -24.6% in April to +0.5% by June. Polish PPI inflation was negative for a third straight month in June but halved to -0.8%.
On the central bank watching front, the People’s Bank of China’s 1-year and 5-year prime loan rates of 5.85% and 4.65% were left unchanged after today’s monthly review. No change had been expected in light of the impressive rebound of economic activity seen in the second quarter. Real GDP soared 54.6% on quarter at an annualized rate, transitioning the first quarter’s 6.8% year-on-year drop into a 3.2% rise compared to the second quarter of 2019. This was the third straight policy review to leave rates steady. Cuts of 20 basis points each in the 1-year LPR were made in February and April, and the 5-year rate had been cut by a total of 15 basis points. Chinese officials have been reluctant to cut the 5-year rate as much as the 1-year rate lest such boost property price inflation excessively.
And the National Bank of Kazakhstan surprised analysts with an unexpected 50-basis point cut of their policy rate to 9.0%. To support their currency back in early April, the rate had been lifted 275 basis points to 12.0% but then lowered to 9.5% toward the end of that month. As in many other economies, growth contracted faster than expected in the first half of 2020.
New Zealand’s service sector purchasing managers index jumped 16.6 points to a 5-month high in June of 54.1. Such had bottomed in April at 25.7.
Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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