Upward Bounce in the Dollar

September 3, 2020

Dollar advances today amount to 0.6% against the Australian dollar and sterling, 0.5% versus the Canadian and New Zealand dollars, and 0.3% relative to the yen and euro. A new high in the dollar was touched against Turkey’s lira after investors learned that Turkish reserves have drained to a 15-year low. The Russian ruble is near a 5-month low, and the price of gold, which exceeded $2000 per ounce a month ago, has settled back nearly to $1940.

West Texas Intermediate crude oil fell 2.2% overnight in continuing reaction to yesterday’s report of a rise in U.S. inventories.

More stock markets are up today than down. Share prices climbed 1.3% in South Korea, 1.5% in New Zealand, 0.9% in Japan and 0.8% in Australia. European markets so far are up 1.5% in France, 1.6% in Spain, 0.8% in Germany and 0.4% in Great Britain.

Another sign of slackening post-pandemic demand emerged in today’s Euroland retail sales report for July. Instead of rising as analysts were expecting, sales volume fell 1.3% in the month and were only 0.4% above their year-earlier level. Sales in the second quarter had tumbled 5.2% on quarter and 6.9% on year.

Retail sales in Poland and Hungary were respectively 2.7% and 0.4% above year-earlier levels in July.

Many, many more August purchasing manager survey results were published today.

  • In a further sign of lessening recovery momentum already, Euroland‘s composite PMI covering service sector activity as well as manufacturing printed at a 2-month low of 51.9 amid worries about a resurgent Covid-19 outbreak as summer turns to autumn. Consumers are observing caution, and job losses picked up in many economies.
  • Japan‘s services sector and overall private activity remained mired in sub-50 contractionary territory. The services PMI fell 0.4 points to a 2-month low of 45.0, but the composite index ticked 0.3 points higher ot a 6-month high of 45.2.
  • Australia‘s services and composite PMIs of 49.0 and 49.4 were both at 3-month lows and reflecting stagnation. Australia’s construction PMI dropped back 4.8 points to a 2-month low of 37.9.
  • The private sector purchasing manager indices of Hong Kong (a 3-month low of 44.0) and Singapore (a 2-month low of 43.6) remained disappointing.
  • Although at 5-month highs, India‘s services and composite PMI scores of 41.8 and 46.0 remained well under 50.
  • So too did the non-oil PMI readings of Egypt (a 2-month low of 49.4), Saudi Arabia (a 2-month low of 48.8) and the United Arab Emirates (a 3-month low of 39.4).
  • Not all PMI news was downbeat, however. For example, China‘s services PMI (54.0) and composite score (55.1) represent 4- and 2-month highs comfortably above the 50 neutrality level.
  • Russia‘s service-sector PMI was somewhat below the July reading but still robust at 58.2, and that was accompanied by the fastest overall economic improvement in 31 months.
  • Britain‘s services PMI rose 2.3 points to 58.8, a 64-month high, and the composite index was even higher at a 6-year peak of 59.1.
  • Sweden experienced its highest composite PMI last month (55.7) and the best score for service sector activity in 21 months.

Greek GDP plummeted 14% on quarter and 15.2% on year in the second quarter. That was the third straight quarterly decline.

Swiss consumer price deflation in August matched July’s negative 0.9% pace. Core consumer prices were 0.4% lower than a year earlier.

In stark contrast, Turkish CPI inflation remained in double digits at 11.77% during July, and producer price inflation in August accelerated to a 1-year high of 11.53%.

Despite three straight increases of Brazilian industrial production including an 8.0% rise in July, the level that month was still 3.0% lower than a year earlier.

Using a modified method of compiling seasonal adjustment factors, new U.S. jobless insurance claims fell to 881k last week from 1.011 million in the previous week. 881 thousand still reflects considerable strain in the labor market, as many furloughed workers are being converted to permanent layoffs.

The U.S. goods and services trade deficit jumped about $10 billion between June and July to $63.56 billion, and the merchandise trade gap alone eclipsed $80 billion.

U.S. labor productivity soared 10.1% last quarter and was 2.8% greater than in the second quarter of 2019. Unit labor costs accelerated to a 4.9% on-year rise.

The Canadian trade deficit of C$ 2.45 billion in July was the third largest shortfall in the past twelve months.

The National Bank of Ukraine’s policy interest rates was kept at 6.0%, having dropped from 12.5% in four incremental moves made in January, March, April and June. A released statement observes signs of recovery from a severe recession, with demand still depressed and inflation moderate. Future monetary policy will hinge upon the evolution of the Covid-19 pandemic.

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

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