Somewhat Firmer Dollar as Long-Term U.S. Treasury Yields Rise Anew

March 10, 2021

The dollar is trading 0.2% higher on a trade-weighted basis and versus the yen and Australian dollar. The greenback also shows a gain of 0.3% relative to the Swiss franc and 0.1% against the euro, loonie, kiwi, and yuan. U.S. stock futures are narrowly mixed, and Japan’s Nikkei closed unchanged. Continental European stocks are higher, while Australia’s market fell 0.8%.  WTI oil is 0.7% higher, while gold has slipped 0.4%.

Investors are hopeful that the $1.9 trillion American Rescue Fiscal Plan will be approved later today with the modifications that the senate made. This is a political and economic win for President Biden. The 10-year U.S. Treasury yield has risen 3 basis points, but comparable yields in Japan and Europe haven’t followed.

Chinese price data for February revealed more inflation than analysts were anticipating. Consumer prices went up 0.6% on month following gains of 0.7% in December and 1.0% in January and but still posted a year-on-year dip of 0.2%, which is not far from November’s 13-month low of -0.5%. Producer price inflation leaped 1.4 percentage points to a 27-month peak of 1.7%.

China‘s other data release today showed an acceleration of on-year M2 money growth to a 2-month high of 10.1% and greater-than-forecast new bank loans totaling CNY 1.360 trillion after January’s record 3.58 trillion yuan total.

U.S. consumer prices in February advanced 0.4% on month and accelerated 0.3 percentage points to a 1.7% 12-month rate of increase. These results matched analyst expectations, but core CPI inflation (minus food and energy) declined unexpectedly to 1.3% from 1.4% in January and 1.6% last December. Gasoline prices soared 6.4% on month and shifted to a year-on-year advance.

Among other countries releasing price data this Wednesday,

  • Norwegian CPI inflation accelerated 0.8 percentage points to a 26-month high of 3.3%.
  • Norwegian PPI inflation made an even greater jump to a 27-month high of 9.7% versus 0.6% in January, -5.7% in December and -17.5% last May at the cyclical low.
  • Despite a 0.5% monthly drop in Portuguese consumer prices last month, their 12-month rate of increased climbed to a 13-month high of 0.5%.
  • Italian producer prices in January experienced their largest month-on-month advance (1.4%) and their smallest on-year dip (-0.3%) in a year and a half.
  • Greece in February recorded its smallest rate of CPI deflation (-1.3%) in nine months.
  • Danish consumer prices last month increased 0.6% both compared to January and versus a year earlier. The on-year pace matched January’s 4-month high.
  • But Czech CPI inflation of 2.1% in February constituted a 26-month low.

French industrial production rose 3.3% in January, the most in a half year, but was still 1.7% below the pre-pandemic level last February. The year-on-year decline was 2.8%.

Greek industrial production increased 3.2% on month and 3.4% on year in January, and the Greek trade deficit of EUR 1.443 billion in January was 24% smaller than a year earlier.

On-year increases in Finnish industrial production (0.9%) and Belgian industrial production (3.8%) during January represented 16- and 3-month highs. A 0.6% year-on-year rise of Dutch factory output was the best outcome in a year.

Business confidence in South Africa in 1Q 2021 declined 5 index points from a 10-quarter high but at 35 remained will above the pandemic trough of +5 in the second quarter of last year.

Building permits in Australia had increased in four straight months but then plunged 19.4% on month in January. The Westpac measure of Australian consumer sentiment improved 2.6% this month.

The Bank of Canada Governing Council has been conducting a scheduled review of monetary policy and is not expected to change its 0.25% overnight target rate. The announcement is due shortly. The rate was slashed by 50 basis points on three occasions last March to that record low.

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


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