Another Fine Daily Session for the Dollar

March 30, 2021

The dollar advanced 0.3% overnight on a weighted basis to a 4-5 month high. The Turkish lira took one of the largest hits; at an intraday low of 8.4595 per dollar, the lira had lost 3% but subsequently cut that slide in half. Against other currencies today, the dollar has risen 0.5% against the yen,  0.3% versus the euro, Swiss franc, Australian dollar and peso, and 0.2% relative to the loonie, kiwi and sterling.

The dollar’s buoyancy reflects attractive interest rate differentials and the comparatively strong U.S. growth prognosis. A lot of this optimism stems from the rapid roll-out of Covid-19 vaccines. At the same time, an accelerating rate of new cases, which topped 70k yesterday, bears watching and seemingly points to a speed-up coming in the recently low daily rate of deaths attributed to the pandemic.

The 10-year U.S. Treasury yield made another large advance of 5 basis points, and its British and German counterparts kept pace with increases of six and five basis points. The Japanese 10-year Japanese yield rose by a lesser two basis points. Japanese February data reported today were better than forecast. Unemployment printed at 2.9% for a third straight month, and retail sales posted the largest rise in eight months. That increase of 3.1% trimmed the 12-month rate of decline to 1.5% from a year-on-year drop of 2.4% in January.

The price of West Texas Intermediate oil fell 2%, an that of gold dropped 1.4% overnight.

Stock markets in the Pacific Rim closed up 2.3% in India, 1.1% in South Korea, 0.8% in Hong Kong, 0.6% in China and 0.2% in Japan but down 1.6% in Indonesia and 0.9% in Australia. In Europe, share prices have risen 0.6% in Germany, 0.5% in France, 0.3% in Italy and 0.2% in the United Kingdom so far.

There were more indications of rising inflation. This was to be expected and Covid restrictions relax.

  • In Germany, consumer prices in March climbed 0.5% on month and by the most on a year-on-year basis (1.7%) in 13 months. German import price inflation swung from minus 1.2% in January to a 22-month high of +1.4% in February.
  • Italian producer prices in February rose 0.5% on month and 0.7% on year, which was the most in 20 months.
  • Belgian CPI inflation accelerated 0.4 percentage points to a 6-month high of 0.9% in March.
  • Austrian PPI inflation in February also printed at 0.9%, a 22-month high and 1.2 percentage points above January’s reading.
  • A negative 0.3% rate of Greek PPI deflation was the least negative in 13 months.
  • Spanish CPI inflation popped from zero percent in February to a 23-month high of 1.3% in March, according to preliminary data.

Tuesday also saw the release of many sentiment indices. Most notably, overall economic sentiment in the euro area jumped 7.6 index points to an 11-month high of 101 in March. consumer confidence matched the 13-month high indicated in the flash report six days ago. By sector, industrial sentiment rose to a 27-month high, and services and retail saw their greatest optimism in 11 and 5 months.

Consumer confidence improved to a 13-month high in Austria, a 3-month high in France, an 11-month high in Portugal, a 7-month high in Greece, and matched the prior month’s one-year high in Sweden.

Business confidence in March climbed to an 11-month high in Greece, a 27-month high in Austria, a 7-month high in Portugal, and moved above zero for the first time in 22 months in Finland.

Today’s batch of retail sales data still reflected headwinds. The year-on-year drop of 14.5% in Portugal last month was the deepest 12-month decline in 10 months. Norway’s on-year comparison remained positive but at 6.1% was the smallest gain in 10 months. Spanish retail sales rose 4.2% on month in February after a 7.6% drop in the prior month and was still 5.9% weaker than in February 2020. Distorted by the Chinese lunar new year holiday, Hong Kong retail sales were 31.7% greater than in February 2020 but the 12-month rate of increase for January-February combined was a much lesser 2.5%. Portuguese industrial production posted a 12-month drop for a fourth straight month, but its magnitude of -2.4% was the least negative in the streak.

U.S. house price inflation remained robust in January, with year-on-year increases of 12.0% in the FHFA index and 11.1% according to the Case-Shiller survey.

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



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