Firmer Dollar as Investors Await U.S. Data Today and FOMC Tomorrow

June 15, 2021

The U.S. dollar‘s largest overnight gains are against the Turkish lira (1.1%), Canadian dollar and sterling (each +0.4). After his meeting with Biden, Turkish President Erdogan didn’t back off his provocative military plans, and that weighed on the lira.

In Pacific Rim stock market action, markets in New Zealand, Japan, Australia Taiwan, and Singapore closed up 1.2%, 1.0%, 0.9%, 0.9%, and 0.7% but those in China and Hong Kong, which had been closed yesterday, dropped 0.9% and 0.7%. Share prices are so far up 0.6% in Germany and 0.5% in the U.K. and France. U.S. stock futures prior to the release of U.S. retail sales and PPI figures were marginally higher.

Ten-year sovereign debt yields are unchanged in Germany and the United States, up a basis point in Japan and down a basis point in the U.K.. West Texas Intermediate crude oil jumped 1.4% to just shy of $72 per barrel, a level not seen in 6-1/2 years.

French consumer price inflation was confirmed at a 15-month high of 1.4% last month.

Italian CPI inflation in May of 1.3% constituted a 30-month high, but core price pressure was barely above zero percent.

German inflation continues to run high among economies using the euro. The 12-month increase of consumer prices jumped half a percentage point to a 152-month high of 2.5% in May.

Polish CPI inflation of 4.7% in May was its highest since the pre-pandemic month of February 2020.

Danish PPI inflation of 1.7% in April was the most in 15 months and twice the prior month’s level.

U.S. producer price inflation again accelerated more sharply than forecast, rising 0.4 percentage points to 6.6%, the largest 12-month increase in over a decade. The month-on-month rise of 0.8% compared with expectations of a 0.6% increase. Core producer prices rose 0.7% on month and 4.8% on year.

U.S. retail sales weakened more than expected in May, dropping 1.3% after April’s 0.9% month-on-month advance. On-year growth remained high at 28.1% but considerably less than the 53.4% 12-month increase between April 2020 and April 2021.

The Empire State New York regional manufacturing index posted a second consecutive retreat, dropping to a 3-month low of 17.4 in June from readings of 24.3 in May and 26.3 in April.

The strain on global supply chains can be seen in a variety of national trade statistics reported today. Imports grew on-year in May by 68.7% in Indonesia and 24.4% in Norway and in April by 34.4% in the euro area, 34.9% in the Netherlands, and 45% in Ireland.

Japan’s tertiary index of service sector activity weakened 0.7% on month in April following declines of 1.1% on quarter in 1Q 2021 and 6.9% in all of 2020.

Chinese foreign direct investment was 35.4% greater in May than a year earlier, the forth straight month with a 12-month increase of 30-something percent.

The year-on-year change in in Hong Kong manufacturing production finally returned to the black last quarter with a gain of 2.6%.

British labor statistics released today showed a 92.6% monthly drop in jobless claims, their largest drop since November 1996, and the highest on-year rise in average wage earnings since March 2007, which reached 5.6% in February-April. Britain’s jobless rate of 4.7% in April constituted an eight-month low.

Euroland’s seasonally adjusted trade surplus fell abruptly to an 11-month low of EUR 9.4 billion in April from EUR 18.3 billion in March, reflecting a 2.3% drop in exports but a 2.4% monthly rise of imports. The January-April unadjusted surplus of EUR 67.7 billion still exceeded the year-earlier total of EUR 56.9 billion.

On the central banking front, minutes from the Reserve Bank of Australia’s policy review earlier this month observe a more solid and rapid recovery pace but reaffirms that achievement of full employment is unlikely before 2024. It is thus way too premature to think of ending quantitative stimulus, although the program could be tweaked along the way.

At the Central Bank of Armenia, by contrast, the key refinancing interest rate was increased for the fourth time since December. Today’s hike, like that in May, was by 50 basis points. The first two moves amounted to 100 basis points in December and 25 bps in February. The rate had bottomed at 4.25% in July 2020, but CPI inflation is now running roughly two percentage points above the 4% target. The short list of central banks hiking interest rates during the first half of 2021 has other authorities in Armenia’s neck of the woods such as Russia, Kyrgyzstan, Ukraine, Belarus, and Georgia. Armenia’s refinancing rate now becomes 6.5%.

Just In: U.S. industrial production rose 0.8% last month. That gain was somewhat greater than forecast and lifted the 12-month advance to 16.3%. Capacity usage of 75.2% was 0.6 percentage points above April’s revised level and over ten percentage points above the May 2020 64.7% level. Still to come: the NAHB U.S. housing index and Treasury-compiled capital flows. The FOMC’s policy announcement, Powell’s press conference, and Biden-Putin summit meeting happen tomorrow.

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

Tags: , , , , , ,


Comments are closed.