Dollar Strengthened against Other Currencies and Gold

June 29, 2021

The driving force behind today’s rise in the dollar has been Covid worries. Against this dominant concern, signs of improving economic confidence and evidence that inflation may be cresting have exerted little influence on financial market trading.

From a global standpoint, over a third of a million new coronavirus infections were identified in the past 24 hours. New restrictions on social gathering have been prompted in parts of Asia and Australia. The Delta variant has amplified fear and uncertainty. In the pandemic struggle, the United States is well positioned because of its leadership in vaccinating the public. While U.S. pandemic deaths that now exceed 600,000 still exceed the totals of other countries, U.S. deaths on Monday accounted for just 1.0% of the global total.

Compared to yesterday’s closing levels, the dollar has strengthened 0.6% against gold and 0.3% against the DXY weighted index of other currencies. The greenback has also risen 0.3% versus the euro, loonie, Swiss franc and sterling and by 0.7% and 0.6% relative to the New Zealand and Australian dollars. With safe haven properties of its own, the Japanese yen has traded in tandem with the dollar.

The ten-year Treasury yield is two basis points firmer and comparable British and German sovereign debt yields are up one basis point. WTI oil is unchanged.

In equity trading,  markets lost 0.9% in China and Hong Kong, 0.8% in Japan, and 1.2% in Singapore. The German Dax is 0.8% stronger, and the British Ftse, Paris Cac and Borsa Italiana are each 0.3% higher. U.S. futures are narrowly mixed.

Economic sentiment in the euro area jumped 3.4 index points to a 233-month high in June and at 117.9 printed just below the 118.2 all-time high of May 2000. The industrial sector’s index rose to a record high, and services reached their best level since the summer of 2007. The employment index hit a 31-month high, and consumer confidence matched the preliminary estimate, which is the best level in 41 months.

Individual country consumer confidence indices for June reported today were at a 40-month high in Finland, a 22-month high in Austria, a 16-month high in Portugal, a 15-month high in France, but a 2-month low in Sweden.

Business sentiment improved to record highs in the Netherlands, Sweden and Austria this month and to the best level since 2007 in Finland. Denmark’s June business confidence index matched May’s 33-month high, and Portuguese and Greek business confidence rose to a 15-month highs. Spanish business confidence had touched a 23-month high in May but settled back to a 3-month low in June. Turkish economic sentiment jumped 5.2 index points in June to a 16-month high.

From a 152-month high in May, German consumer price inflation settled back 0.2 percentage points to 2.3% in June. Icelandic CPI inflation dipped 0.2 percentage point in April and another 0.1 percentage point in May to a 3-month low. And Vietnamese CPI inflation slowed a half percentage point to a 3-month low of 2.4%.  Spanish CPI inflation dipped 0.1 percentage point to 2.6% but remained close to May’s 4-year peak. To be sure, oil price pressures remain substantial at the wholesale level. Producer price inflation in Singapore of 18.1% in May was the most since July 2008. Icelandic PPI inflation more than doubled to 9.2% in May.

In other data released abroad on Tuesday, Japanese retail sales contracted month-on-month in May as such had done in April but were 8.2% greater than in May of 2020. Japan’s jobless rate rose 0.2 percentage points to a 5-month high of 3.0% in May.

On-year growth in Portuguese retail sales declined to 16.1% in May from a record 28.5% in April. Spanish retail sales had likewise leaped 40.5% on year in April and were 19.6% greater in May than in the same month a year earlier.

French unemployment ticked up to 8.1% in the first quarter from 8.0% in 4Q 2020 and 7.8% in the first quarter of last year.

The U.K. nationwide house price index increased 0.7% on month and by 13.4% on year, attesting to the fact that housing has been one of the strongest post-pandemic sectors. 13.4% was the largest on-year rate of increase since November 2004.

In the U.S., house price inflation according to the monthly FHFA measure accelerated 1.7 percentage points to 15.7%. And according to the Case-Shiller survey, U.S. house price inflation in 20 metro areas increased by 1.5 percentage points further to 14.9% in April. The Conference Board’s gauge of U.S. consumer confidence will be reported shortly.

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

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