Softer Dollar and Rising Equities as Yearend Approaches

December 29, 2020

The dollar fell broadly but only moderately overnight. It lost 0.7% against the Mexican peso, 0.5% relative to the New Zealand dollar, 0.4% versus the euro and Australian currency, 0.3% against the Swiss franc, Canadian dollar and sterling, 0.2% relative to the yen and 0.1% against the yuan. The euro at $1.2259 is just 14 pips south of its 2-1/2 year high hit earlier this month, and even the fragile Turkish lira touched an 11-week high.

On the U.S. policy front, the House of Representatives acquired bipartisan support to override President Trump’s defense bill veto and backed President Trump’s call to lift the size of personal checks from $600 to $2,000. Both actions put senate Republicans in a politically awkward position.

Covid vaccine distribution is not going as smoothly as did its development. In the U.S., for instance, only a tenth of the targeted December vaccinations had been administered as of yesterday. British Covid cases and hospitalizations hit record highs yesterday. Over the past 24 hours, the United States accounted for three-eighths of new cases and just short of a fifth of global deaths from the disease.

The Japanese Nikkei leaped 2.7% today, closing at its best level since August 1990. Stock markets rose 1.7% in New Zealand, 1.0% in Hong Kong, 0.5% in Australia, and 0.4% in South Korea but fell 0.5% in China. Markets are up 2.1% in the U.K., 0.7% in Switzerland, and 0.4% in France. U.S. stock futures point to a 0.5% advance at the open.

Ten-year sovereign debt yields have become more U.S.-advantageous. While the 10-year Treasury yield is up two basis points, its British and German counterparts have slipped 3 and 1 basis points, respectively, while the 10-year Japanese JGB remains at a mere 0.02%.

West Texas Intermediate crude oil climbed 1.2% in price overnight. Gold is marginally up.

South Korean consumer confidence fell 8.1 index points to a 3-month low in December. At 89.8, the latest reading is almost as far below last January’s 104.2 and above April’s low of 70.8.

November producer prices in the Philippines dropped 0.4% on month and 3.4% on year, marking the tenth on-year decline in a row but the smallest since -3.0% in the year to July. Producer prices in Singapore rose 0.4% on month but were still 9.4% below their November 2019 level.

Portuguese retail sales slumped 3.2% on month in November and recorded their largest 12-month decline (5.1%) since June.

Austria’s manufacturing purchasing managers index rebounded 1.8 index points in December to 53.5, the second highest level after a 23-month high of 54.0 in October.

Brazilian unemployment averaged 14.3% in September-November, a half percentage point higher than in the previous 3-month period and up from 11.0% at end-2019.

Sweden recorded a SEK 1.4 billion trade surplus in November. August was the only month with a deficit so far in 2020, but November’s surplus was the smallest of 2020 and compares to a combined January-November surplus of SEK 56.0 billion.

U.S. data reports today include the Case Shiller house price index and the Richmond Fed regional manufacturing index.

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

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