Across-the-Board Strength in the Dollar Early this Friday

May 28, 2021

Prior to today’s release of U.S. data, the dollar had advanced 1.3% against the Turkish lira, 0.6% versus the Swiss franc and Australian  dollar, 0.4% vis-a-vis the loonie, peso and weighted DXY index, 0.2% versus the yen, and 0.3% against the euro and sterling.

U.S. stock futures had extended yesterday’s gain by around 0.5%, and share prices elsewhere had risen 2.1% in Japan, 1.6% in Taiwan, 1.2% in Australia, 0.7% in South Korea and France, and 0.6% in Germany and India.

The price of WTI oil had climbed 0.6% to above $67.00, and that of gold had slipped 0.3%.

Ten-year sovereign debt yields were little changed.

Economic sentiment in Euroland improved 4.0 index points to a 40-month high. Among sectors, services showed a 9.1-point improvement, and the rise in industrials was not as steep but nonetheless to an historical high. Consumer confidence was unrevised from the preliminary 2.5-year high.

Japan’s jobless rate disappointedly rose 0.2 percentage points to 2.8%, and the ratio of jobs offered per applicant slipped slightly.

More evidence of the spike in inflationary pressure emerged:

  • CPI inflation in Italy leaped 3.8 percentage points to a 246-month high of 6.5%.
  • Austrian PPI inflation accelerated to a 119-month high of 4.6% from 2.8%.
  • German import price inflation of 10.3% in April, powered by a 101% surge in the energy component and at a 124-month high, was up from 6.9% in March and 1.4% in February.
  • French CPI inflation in May was only 1.4% but a 15-month high nonetheless.
  • French PPI inflation in April of 7.3% was the most since July 2008.
  • Greek PPI inflation of 14.6% in April was also the most since July 2008.
  • Belgian CPI inflation rose 0.2 percentage points to a 23-month high of 1.46%.

Swedish quarterly GDP growth in 1Q was revised 0.3 percentage points lower to 0.8%. The year-on-year growth comparison was zero percent following growth of 0.3% in the previous four quarters ending 1Q 2020. A separate Swedish data release for retail sales in April revealed a monthly contraction of 1.4%, resulting in a somewhat smaller 7.2% rise versus the same month a year earlier.

French first quarter GDP growth was revised downward by 0.5 percentage point to negative 0.1%. Following a contraction of 1.5% in 4Q 2020, this revision confirms a double-dip recession and marks the fifth contraction in a sequence of six quarters. However, GDP was 1.2% higher than in the first quarter of 2020.

Even more disconcerting, French household spending sank 8.3% on month in April due to a third Covid lockdown. This portends poorly for much of a recovery in the present quarter.

Finnish economic growth in the first quarter of 2021, as was the case in France, has been revised a half percentage point lower to -o.1%. Finnish GDP as a result was also 1.0% below its year-earlier level.

Economic sentiment in Turkey fell to a 9-month low in May.

In contrast, the KOF Swiss leading economic indicator rose 6.8 points to a record high this month.

Portuguese retail sales surged by a record on-year 28.3% in April, reflecting the weak year-earlier level.

On-year growth in Norwegian retail sales dropped to 2.9% in April from 6.8% in March.

U.S. stock futures slipped a bit but remain green on the screen after the release of U.S. personal spending figures were released. The 10-year Treasury yield increased a basis point. Investors are not merely concerned that inflation is picking up. That was widely predicted, but a pattern has developed that actual price data repeatedly show larger rises that was analysts had been  predicting.

The U.S. PCE price deflator jumped 0.6% on month in April and accelerated to a 12-month 3.6% advance from 2.4% in the prior month and 1.2% last December. A 24.8% on-year leap in the energy component was the main driver of higher inflation, but core PCE inflation of 3.1% was also well above 1.9% in the prior month and 1.4% at the end of 2020.

U.S. personal income dived 13.1% last month following a 20.9% increase in March and a 6.9% drop in February. Personal spending grew 0.5% in April, which was considerably less robust than the 4.7% jump in March.

Following a record $91.98 billion U.S. merchandise trade deficit in March, such narrowed to $85.23 billion in April, as imports dropped 2.2% but exports rose 1.2%.

Still to come:  U.S. consumer sentiment according to the U. Michigan survey and the Chicago regional purchasing managers index.

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


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