Dollar’s Value Erodes Gradually Further
August 19, 2020
Overnight the dollar lost another 0.5% against sterling and the kiwi, 0.3% relative to the Australian dollar, 0.2% relative to the peso and yuan, and 0.1% vis-a-vis the yen and loonie. But EUR/USD held steady, and the Swiss franc lost 0.3%.
Ten-year sovereign debt yields have settled back three basis points in the U.K., two bps each in Germany and the United States, and a single basis point in Japan.
The prices of gold and WTI oil fell 1.1% and 0.8% so far today.
Share prices closed up 0.3% in Japan but fell 1.2% in China, 1.0% in New Zealand, and 0.7% in Hong Kong and Taiwan. European stock markets are fractionally higher.
Both globally and from the United States, more Covid-19 cases and deaths were reported over the past 24 hours than in the previous day. The outlook for securing a U.S. fiscal package has improved, but this time the Democrats are shaving their stimulus demands. The Democratic Party National Convention saw many people speak Tuesday, and delegates formally nominated Joe Biden as their candidate for president. The U.S. Senate Intelligence Committee released a bipartisan report supporting the findings of the Mueller investigation that Russia interfered with the U.S. 2016 election with the intent of enhancing Trump’s election prospects. Tensions between the Trump administration and China’s government remain high. Trade talks are off for now.
Central bank rates were cut in the African nations of Namibia and Zambia but left unchanged in Indonesia after scheduled reviews.
- The Bank of Namibia’s repo rate was reduced by 25 basis points to a record low of 3.75%. This was the fifth cut since February, bringing the total drop since then to 275 basis points. The latest change matches the size of last month’s reduction at the South African Reserve Bank and will help maintain the Namibian currency’s parity with the rand.
- The Bank of Zambia’s monetary policy rate was lowered 125 basis points to 8.0%. There had been one large 225-basis point cut done earlier in May. Officials noted a significant worsening of economic conditions last quarter related to the Covid-19 pandemic.
- Indonesia’s seven-day reverse repo rate was kept steady at 4.0%, a level that officials expect will help maintain external stability, counter recession, and help lift inflation toward the center of the 2-4% target.
Japanese releases of trade and machinery order data today reflect weakness. The trade balance unexpectedly flipped into a small JPY 12 billion surplus in July because of a large 22.3% on-year slump in imports. Exports fell almost as much, 19.2%. Core domestic machinery orders unexpectedly fell 7.6% on month and 22.6% on year in July. The monthly drop was accompanied by declines in orders from the public sector and foreign markets as well.
A streak of nine consecutive increases in Hong Kong’s unemployment rate was broken in July with a 0.1 percentage point dip to 6.1%. That turnaround may not endure, since Covid cases have picked up.
CPI inflation in the euro area was confirmed at a 4-month high in July of 0.4%. Core inflation of 1.2% was as expected. Energy was 8.4% lower than a year earlier, the smallest on-year drop since March, but food inflation fell to 2.0% from a recent high of 3.6% set in April.
Euroland’s seasonally adjusted current account surplus rebounded sharply to EUR 20.7 billion in June from a multi-year low of EUR 11.3 billion in May. The unadjusted surplus of EUR 275.1 billion between mid-2019 and mid-2020, equal to 2.3% of GDP.
Higher-than-forecast British inflation helped lift sterling to an 8-month high. Consumer prices went up 0.4% on month in July and accelerated in on-year terms by 0.4 percentage points (ppts) to a 4-month high of 1.0%. Core CPI inflation also climbed 0.4 ppts to 1.8%. Producer output price deflation of 0.9% matched June’s result. Producer input price deflation subsided further to -5.7% from -6.7% in the prior month and -0.2% back in February.
Portuguese PPI inflation also lessened, printing at -3.5% in July after -5.7% in June and -6.6% in May.
Austrian CPI inflation rose to a 5-month high of 1.7% in July from 1.1% in June and 0.7% in May.
In New Zealand, producer output prices fell 0.3% last quarter, shrinking the year-on-year increase to 1.5% from 2.2% in 1Q. Producer input prices sank 1.0% on quarter, the most in 17 quarters. In year-on-year terms, producer input prices were down 0.1% versus a 1.2% increase in the first quarter of this year.
June’s Canadian consumer price spike in June was largely reversed in July after a 0.1% monthly dip. The 12-month inflation rate, which had jumped to 0.7% in June from -0.4% in May, fell back to 0.1% last month. Core CPI dropped 0.4 percentage points to 0.7%.
Today’s most awaited event is the publication of FOMC minutes due at 14:00 EDT.
Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank Indonesia, Euroland CPI and current account, Japanese machinery orders and trade balance
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