Trump Fans Political Chaos but Dollar Slippage Stays Orderly

November 20, 2020

The Trump campaign is continuing to try to discredit election results in several states. If it can persuade some key states not to certify Biden’s win, the President-Elect could fall short of the needed 270 electoral votes, throwing the election decision back to state legislatures, the House of Representatives, and perhaps the Supreme Court. The strategy is a very long shot that will nonetheless do great damage to the United States. It is delaying key parts of the transition, putting American national security at risk and prolonging the date when a Covid vaccine might be widely available to the public. The strategy is also solidifying the perceived illegitimacy of Biden’s win among President Trump’s loyal base and may be signalling to far right armed extremists to stand by for further direction should Biden secure over 270 electoral votes.

The dollar slipped overnight but merely by 0.4% against the yuan, 0.3% versus the peso and kiwi, and 0.2% relative to the Australian dollar. Yesterday, the dollar rose slightly, and today it is unchanged against the loonie and sterling and 0.1% stronger against the euro, Swiss franc and yen. All things considered, the U.S. currency is handling political uncertainty and accelerating Covid-19 cases and deaths in the United States very well.

New coronavirus cases in the U.S. rose just short of 200k during the past 24 hours, and deaths yesterday exceeded 1,900. The pandemic continues to intensify in Europe, too, hitting new daily highs in several countries there.

In opposition to the desire of top Fed officials, U.S. Treasury Secretary Mnuchin said that several elements of the 2020 Cares Act including the Federal Reserve lending powers will be discontinued after December 31st.

U.S. stock futures moved only marginally on balance overnight. Share prices rose 0.4% in China and Hong Kong but fell 0.4% in Japan and Indonesia. Singapore’s stock market spiked 1.3%. In Europe, share prices are up 0.5% in Spain, Italy and the U.K. and by 0.4% in France and Germany.

Ten-year German bund and British gilt yields dipped a basis point, while their U.S. sovereign debt counterpart is a basis point firmer.

WTI crude oil strengthened 0.6%. The price of gold edged 0.1% higher.

At its monthly review, the People’s Bank of China officials made no change to the 1- and 5-year loan prime rates, which since cuts last April have been at 3.85% and 4.65%.

Japan’s core CPI posted a 0.7% year-on-year decline in October, its most disinflationary reading since March 2011. That was the month of the infamous earthquake and tsunami that damaged a nuclear power plant. According to released preliminary November purchasing manager survey findings also reported today, Japan’s composite PMI index fell back a full point to a two-month low of 47.0. The sub-indices for manufacturing (47.6) and services (46.7) also remained well below the 50 level that separates expansion from contraction.

British retail sales volume, by contrast, surprised on the upside. Instead of holding unchanged as expected after September’s 1.4% rise, sales increased by a further 1.2%, which lifted the year-on-year advance to an 18-month high of 5.8%.

There were several November consumer confidence reports out today. Consumer sentiment in the U.K. slipped two points to a 6-month low of -33 in November. Consumer confidence readings in Denmark of -7.6 and Turkey of 80.1 were at 6- and 3-month lows. But the Belgian index rose two points to an 8-month high of -15, and Dutch consumer confidence printed at a 4-month high of -26 after -30 in the prior month.

German producer prices edged 0.1% higher in October, trimming its 12-month rate of decline by 0.3 percentage points to a 7-month low of 0.7%. Non-energy producer prices were 0.1% above a year ago, while the energy component dropped by 2.9%.

South Korean producer prices fell 0.5% on month and 0.6% on year in October. That’s the eighth straight on-year decline in a row.

Irish wholesale prices advanced 0.9% in October, resulting in the smallest on-year drop (5.1%) in half a year.

Polish producer prices fell 0.4% in the 12-months through October, their smallest on-year slide in seven months. On-year growth in Polish industrial production slowed from 5.9% in September to 1.0% in October, and the January-October level was still 2.4% below its year-earlier figure.

There was a large two-percentage point increase in Hong Kong‘s on-year rate of consumer price inflation last month, but the change was still downward in direction (-0.2%) for a fourth straight month.

Italian industrial orders had risen four straight months including a 13.5% jump in August, but September’s 6.4% retreated cut the 12-month rate of increase to 3.2% from 5.8% the month before.

Capacity utilization in Sweden revived from 82.4% in the second quarter to 86.8% last quarter. That’s the best quarter-to-quarter improvement since the winter of 2010.

Indonesia last quarter experienced its first current account surplus since the third quarter of 2011, and it equaled 0.4% of GDP compared to a deficit equal to 2.7% of GDP recorded in the third quarter of 2019.

The Group of Twenty’s annual summit begins tonight in Riyadh.

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

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