Modest Dollar Pull-Back

April 12, 2021

On a Monday with few data releases, the dollar has slipped 0.3% against the yen and sterling, 0.2% relative to the Mexican peso, and 0.1% versus the euro, Swiss franc, Australian dollar, Chinese yuan and against its weighted DXY index.

Fed Chairman Powell gave an upbeat interview aired Sunday night on 60 minutes in which he said U.S. growth is poised to jump into the highest growth gear now in the past several decades. The kind of financial market breakdown seen in 2008 is highly unlikely. Two different risks to his rosy forecast are the possibility of a setback in containing the Covid-19 pandemic and cyber mischief. Higher inflation is likely to prove self-limiting. The economic damage of the pandemic could have been much worse if prompt monetary and fiscal policy stimulus had not been forthcoming.

Share prices in the Pacific Rim overnight dropped 0.8% in Japan but fell 3.4% in India, 2.0% in Indonesia, 1.1% in China, 0.9% in Hong Kong, 0.4% in New Zealand, and 0.3% in Singapore and Australia. European stock markets are narrowly mixed, and U.S. stock market futures have edged marginally below last week’s record highs.

Ten-year sovereign debt yields have barely moved. The price of WTI oil had slipped below $60 but then recovered 1% to that level. The price of gold is 0.2% softer.

Retail sales volume in the euro area grew 3.0% in February, which was twice what analysts were predicting. But a 2.9% year-on-year decline with the third negative result in four months. Sales rose 1.2% in Germany but fell 1.2% in France.

A 0.8% monthly rise Japanese domestic producer prices last month beat expectations and resulted in the first 12-month increase (1.0%) since February 2020. Import prices soared 3.8% on month and swung from a 12-month decline of 3.1% in February to a 12-month rise of 5.6%.

A 65% on-year upsurge in Japanese machine tool orders in March was the largest such advance since February 2011. Bank lending in Japan posted on-year increases of 6.2% in the first quarter and 6.3% in March.

A Turkish central bank interest rate hike in March prompted Prime Minister Erdogen to fire the central bank governor, which in turn ignited a sharp depreciation of the lira. This month’s review of monetary policy is scheduled for Thursday. Meantime, Turkish data released today included a 7-month high in unemployment to 13.4% in February and a 2-month high in the current account deficit to $2.61 billion, which was also 89% wider than the deficit in February 2020.

Indonesian retail sales continue to be plagued by social distancing to contain that country’s pandemic. Sales in February fell 2.7% on month and were 18.1% fewer than a year earlier.

Ireland’s construction purchasing managers index printed below the 50 breakeven level for a third straight month but, at 30.9, was above February’s reading of 27.0 and January’s eight-month low of 21.2.

Despite a 1.0% monthly decline, Danish consumer price inflation, that is the price rise from a year earlier, accelerated to a 23-month high of 1.0% in March. A separate Danish economic data release for industrial production revealed drops of 1.0% on month and 1.8% on year in February..

In China, new yuan lending totaled 2.73 trillion yuan in March, a 2-month high. On-year growth in M2 money, however, was at a 2-month low of 9.4%.

Filipino retail price inflation rose 0.1 percentage point to a half-year high of 1.4% in February.

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



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