Revolting Developments in the United States but Dollar Narrowly Mixed

January 13, 2021

The United States experienced a new record high daily death count yesterday from Covid that exceeded 4.4k and was accompanied by almost 230k new reported cases of the illness. A drop of 10 years in the government’s recommended minimum age for getting a vaccine now and other sudden shifts in guidelines for administering the shot have sowed more distrust about the vaccine’s safety.

Newly released footage of the U.S. Capitol riot a week ago, plus other internet discoveries regarding the coordination of that attack, are depicting a more aggressive conflict than realized initially.

Vice President Pence rejected congressional calls for invoking the 25th amendment to remove Trump, so lawmakers have turned to their plan B, which is an impeachment vote. Congress remains largely split on partisan lines over impeachment with just a week left in Trump’s term, but it looks probably that impeachment will be passed later today.

Bilateral dollar movements against the euro, yen, Swiss franc, loonie, yuan and peso overnight were narrowly mixed. The trade-weighted DXY dollar index is hovering just above the 90 threshold at 90.27. Sovereign debt yields are below this week’s earlier highs. The prices of WTI oil and gold are up 0.4% and 0.5% compared to Tuesday’s close.

U.S. equity futures point to a lower open. Stock markets in Asia rose 1.0% in Japan and 0.7% in South Korea but down 0.3% in China and 0.2% in Hong Kong. European share prices have also lost modest ground.

Industrial production increased more than forecast in the euro area in November. A 2.5% monthly advance was the seventh rise in a row and whittled down the 12-month rate of decline to just 0.6% from 3.5% in October and 11.8% at mid-2020. German output climbed 0.8% on month, but Italian, French and Italy production dropped by 1.4%, 0.9% and 0.3%. Output of capital goods increased 7.0%, but consumer good production fell.

German wholesale prices dropped 1.2% on year in December and fell by an average of 2.0% for last year as a whole. A 0.1% uptick in Germany’s index of leading economic indicators in November matched October’s result.

Portuguese consumer prices slid on month in December as such had in November as well, and inflation ended 2020 at negative 0.2%. Average inflation for full-2020 was zero percent.

Czech CPI inflation decelerated to a 2-year low of 2.3% in December. Over the twelve months ending November, Czech industrial production rose 0.4%, but retail sales dropped 7.0%.

November on-year growth in Turkish retail sales and industrial production amounted to 11.9% and 11.0% in Turkey.

Japanese machine tool orders were 8.7% greater than a year earlier in December. That advance was very close to November’s rise, which had snapped an extended streak of steep on-year declines. The stock of Japanese M2 money in December accelerated to 9.1% last quarter from 8.5% in 3Q, 5.3% in 2Q, and 3.0% in the first quarter of 2020.

South Korean unemployment of 4.6% last month represented a 131-month high and was 0.9 percentage points above the year earlier level.

Chinese motor vehicle sales increased 6.4% on year in December but recorded an average 1.9% drop in 2020 as a whole.

U.S. consumer prices advanced 0.4% last month, resulting in a 1.4% December-over-December increase. This was a tad above expectations but also matched the 2020 average CPI inflation rate of 1.4%, which was down from 2.3% in 2019. On-year consumer price growth during the year ranged from 0.1% in May to 2.5% in January. December’s 0.4% monthly increase was powered mostly by an 8.4% leap in gasoline. Core CPI inflation, which excludes food and energy, remained steady last month at 1.6%.

On the central banking front, the Federal Reserve Beige book of regional economic conditions will be published later today, and the National Bank of Poland is reviewing its monetary policy today.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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