Dollar Up 0.2% Against Euro, yen and Weighted index on Final Business Day of July

July 30, 2021

The U.S. currency also climbed overnight by 0.3% against sterling and 0.1% relative to the Swiss franc.

However, equities have dropped, especially in Japan (-1.8%), Hong Kong (-1.4%), New Zealand (-1.2%), Spain and Taiwan (each down 0.9%), but also in Indonesia (-0.8%), the U.S. (Nasdaq -0.6% and S&P 500 down 0.4%), the U.K. (-0.5%) and Germany and Australia (each off 0.3%).

The ten-year U.S. Treasury yield fell four basis points overnight and 23 bps since midyear.

The price of WTI oil is 0.3% firmer; that of gold has slipped 0.4% consistent with today’s general rise in the dollar.

Investors are absorbing a flood of data reported today.

U.S. personal consumption expenditures and personal income in June rose 1.0% and 0.1%. Each advance outperformed street expectations, but inflation measured by the PCE price deflator (4.0% overall and the same as in May and 3.5% for core PCE) was a tad less than expected.

The Chicago regional purchasing managers index rebounded 7.3 index points to 73.4 in July, almost repeating May’s 47-1/2 year high of 75,2. The U. Michigan/Reuters index of U.S. consumer sentiment in July was revised upward to 81.2. A 13-month high of 88.3 had been recorded in April.

St. Louis Fed President Bullard made predictably hawkish remarks, expressing a desire for tapering to begin soon and QE stimulus to end early  in 2022.

After back-to-back contractions in real GDP in the euro area, such rebounded 2.0% (not annualized) last quarter. The year-on-year comparison was +13.7% versus -14.6% in the four quarter through 2Q 2020. Euroland’s unemployment rate fell 0.3 percentage points to a 13-month low of 7.7% in June, and inflation in the joint European currency area has remained more subdued than in the United States. Consumer prices dipped 0.1% on month in July and edged up to a 12-month 2.2% rate of increase from 1.9% in June and 2.0% in May. Core CPI inflation dropped 0.2 percentage points to a mere 0.7% and was also half a percentage point lower than 1.2% in July 2020, and overall inflation was confined mostly to energy which swung from -8.4% in the year to July 2020 to +14.1% over the ensuing twelve months.

Japan reported several key economic indicators, too.

  • Industrial production boomeranged from a slump of 6.5% in May to a greater-than-forecast rebound of 6.2% in June. Second-quarter IP was up 1.0% versus 1Q’s level and 19.8% greater than the second quarter 2020 level.
  • Retail sales advanced 3.1% in June and 0.1% on year even as news arrived that Covid infections in Tokyo, where the Olympics are being held, have risen to a half-year high.
  • Japan’s jobless rate slipped to a 2-month low of 2.9% in June.
  • On-year growth in housing starts slowed in June to a 2-month low of 7.3%, while construction orders rose 32.3%, the most in 27 months.

Canadian monthly GDP compiled from the supply side fell 0.3% in May after a 0.5% drop in April. GDP was 14.6% greater than in May 2020 but still somewhat lower than its pre-pandemic level. Canadian producer prices were flat on month in June but 16.8% above the mid-2020 level.

Mexican GDP climbed 1.5% in the second quarter, marking the fourth straight quarter of positive growth. That resulted in a record 19.7% rate of on-year GDP growth.

Real GDP in Hong Kong slumped back 1.0% last quarter but posted on-year growth of 7.5%. A six-quarter sequence of negative on-year growth had ended in the final quarter of 2020. GDP then leaped 5.5% in the first quarter this year, but slower export growth exerted a drag more recently.

Brazilian unemployment exceeded 14.0% for a fifth straight month in May and at 14.6% almost reached March’s six-month high of 14.7%.

Australian producer prices, which are reported quarterly, went up 0.7% in 2Q and posted a 7-year high on-year advance of 2.2%.

Retail sales in South Korea rebounded 1.4% last month but posted a 5-month low on-year increase of 1.6%.

Spanish retail sales increased 0.2% on month and 1.4% on year in June, its smallest 12-month rise since dropping 6.0% on year in February. Retail sales in the Netherlands were 6% greater last month than in June 2020.

Producer prices between June 2020 and June 2021 rose 5.5% in Thailand, 12.6% in Greece, 6.9% in Austria, 5.0% in Poland, and  17.0% in Belgium but fell 2.4% in the Philippines.

Turkey’s first-half trade deficit of $21.17 billion was 11.4% smaller than in the first half of 2020.

South African export growth far eclipsed import growth in the first half of this year, resulting in a 256 billion rand trade surplus.

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


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