Dollar Slides Slightly Further

May 3, 2021

There are holiday closures today in China for Labor Day, Japan for Constitution Day and Great Britain for the early spring bank holiday.

The dollar slipped overnight by 0.4% against sterling and 0.2% relative to the euro, Aussie dollar, kiwi and in the DXY weighted dollar index. The dollar is steady against the loonie, yuan and peso and has edged up 0.1% vis-a-vis the Swiss franc and Japanese yen.

Share prices in Asia fell 1.3% in Hong Kong, 2.0% in Taiwan, and 1.0% in Singapore. Alternatively, European markets have seen equities so far rose 0.9% in Italy, 0.6% in Germany, 0.5% in Spain and 0.4% in France, and U.S. futures also point to a higher open.

Prices for gold and WTI oil have firmed 0.6% and 0.1%. Ten year U.S. Treasury and German bund yields are two and one basis points higher.

Today’s biggest data revelation has been a 7.7% monthly jump in German retail sales volume in March. That was more than twice the expected size of the the increase and the largest advance in ten months. It also resulted in a record on-year increase of 11.0% and raised sales to 4.4% more than the pre-pandemic level in February 2020.

Numerous manufacturing purchasing manager survey results have been reported around the world, several of which climbed to record highs. One of those all-time peaks involved Euroland whose PMI index printed 0.4 points higher at 62.9. Among individual Ezone members, record highs were reached in the Netherlands of 67.2, Austria of 64.7, and Italy of 60.7. Spain’s 57.4 PMI was the highest in 256 months. The German manufacturing PMI reading (66.2) and French score (58.9) represent two-month lows but convey strong rates of growth. These surveys also attest to intensifying inflation aggravated by lengthening supply-chain disruptions.

The CBA-compiled Australian factory purchasing managers index also rose to a record high (59.7), and the AIG-compiled Australian PMI reading advanced 1.8 points to a 37-month high of 61.7. South Africa‘s Absa-compiled manufacturing PMI printed at a 2-month low of 56.2, still well above its end-2020 level of 50.3.

Record high PMI scores were reported by Malaysia of 53.9 and Indonesia of 54.6, but PMI scores dropped during April in the Philippines to a 6-month low of 49.0 and in South Korea to a 3-month low of 54.6. Taiwan‘s PMI rose 1.6 points to a 133-month high of 62.4, while India‘s reading of 55.5 was at a 2-month high.

The Swiss manufacturing PMI reading increased 3.2 points to a record peak of 69.5, and Sweden‘s reading of 69.1 implied the fastest rate of growth since late 1994. Denmark’s PMI jumped 6.6 points higher to an all-time peak of 72.0. Norway’s PMI settled back 1.4 points to a 2-month low but still lofty 59.1.

A more significant manufacturing PMI decline occurred in Turkey, which the manufacturing index dropped 2.2 points to an 11-month low of 50.4, indicating the slowest rate of improvement since the index first moved above 50 nearly a year ago.

The Turkish lira was already looking vulnerable, as central bank officials face another scheduled policy review on Thursday. Prime Minister Erdogan doesn’t want higher interest rates and recently fired one central bank governor for not obeying that preference. But CPI and PPI data released today revealed a further climb. CPI inflation of 17.14% in April versus 11.76% last September was at a 23-month high, and PPI inflation was even more elevated at a 29-month high of 35.17% versus 5.53% in May 2020.

Indonesian CPI inflation was at a 3-month high last month but only 1.42%. Moreover, the monthly rise of consumer prices was just 0.1% for a second straight time.

Real GDP in Hong Kong revived last quarter. The on-quarter increase of 5.3% was the most in 70 quarters. In year-on-year terms, growth turned positive for the first time since 2Q 2019 and, at 7.8%, was the strongest pace in 11 years.

The U.S., Canadian and Mexican manufacturing PMI results will be reported shortly. U.S. construction spending data also get released today.

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

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