Strengthening Dollar

September 16, 2021

Broadly-based overnight appreciations of the dollar include gains of 0.7% against the Swiss franc and Turkish lira, 0.5% versus the euro, kiwi, and sterling, 0.4% relative to the yen and Australian dollar, and 0.2% vis-a-vis the Canadian dollar and Mexican peso. The DXY weighted dollar index advanced 0.4% and is just 1.9% below its 52-week high but 4.2% stronger than its 52-week low.

U.S. economic data reported this Thursday have been supportive. While analysts were expecting U.S. August retail sales to have fallen almost 1% on month, such instead went up 0.7% thanks to a 1.8% jump in sales excluding motor vehicles and parts. The Philly Fed manufacturing index rebounded 11.3 index points to a 3-month high of 30.7 in August (that’s still down from 51.8 last March followed by a reading of 50.2 in April). New jobless insurance claims last week increased by 20k, but the four-week average slid further to 334-1/4k, which¬† is the smallest since the onset of the pandemic.

Ten-year sovereign debt yields are four basis points higher today in both the United States and Great Britain, and their Japanese and German counterparts have risen by two and one basis points, respectively.

The price of WTI oil settled back 0.5% and is 1.3% below Wednesday’s intra-day peak. Gold weakness persisted with a further price decline of 1.9% to a one-month low.

Fifteen minutes into the U.S. stock trading day saw a mixed range of movement, with the S&P up 0.9%, the DOW just 0.2% firmer, and the Nasdaq off 0.3%. Earlier in the day, equities closed down 1.5% in Hong Kong, 1.3% in China, 0.7% in South Korea, 0.6% in Japan but up 0.6% in Australia. In Europe, stock markets in Spain, Italy, and France show gains so far of over 1.0%, and the German DAX and British FTSE are up 0.7% and 0.5%.

Japanese August trade data showed lively two-way growth, with imports soaring 44.7% on year and exports advaning by 26.2%. The trade balance swung from a JPY 228 billion surplus in August 2020 to a JPY 635 billion deficit last month, and such widened in seasonally adjusted terms from a six billion yen deficit in July to a 272 billion yen deficit in August.

Euroland’s seasonally adjusted trade surplus rose 12.6% to a two-month high of EUR 13.4 billion in July. Unadjusted exports and imports in January-July were 14.8% and 15.5% greater than during the first seven months of 2020.

After expanding only 6.2% in 2020, Chinese foreign direct investment recorded on-year growth of 28.7% in the first half of 2021, but this year’s pace of growth has slowed to 22.3% in January-August. Hong Kong’s jobless rate fell to a 17-month low of 4.7% in June-August.

SECO, a panel of economists advising the Swiss government, has revised downward projected Swiss GDP growth in 2021 to 3.2% from 3.6% in the previous quarterly forecast. It also expects growth of 3.4% next year and foresees CPI inflation of 0.5% in 2021 followed by 0.8% in 2022.

Motor vehicle sales in the European Union were 19.2% fewer in August than a year before. Even so, that was the smallest 12-month decrease since May 2020.

Canadian housing starts dropped to an 8-month annualized low of 260.3k in August, which reflects a continuing robust pace of development.

Australian labor statistics highlight the impact of the pandemic. While the jobless rate there of 4.5% was its lowest since November 2008, the real story is told by the labor force participation rate, which slowed to 65.2 from 66.2% just two months earlier. A 146k slump in the number of jobholders last month was divided almost equally between full-time employees and part-time workers.

Real GDP grew by 2.8% last quarter in New Zealand. That’s twice as fast as in the first quarter and lifted on-year growth to a record 17.4%. GDP in the pandemic-stricken second quarter of 2020 had been 10.2% below its year-earlier level.

Czech producer price inflation accelerated 1.5 percentage points to a 340-month high of 9.3% in August.

In other U.S. news this Thursday, new Covid infections seems to have plateaued at an troublesome level somewhat above 150k per day, while deaths from the disease continue to crest and are just south of 2000 per day. It won’t be much longer before global and U.S. deaths from Covid surpass 5 million and 700 thousand, respectively. President Biden’s ambitious economic proposals have run into a rough patch in Congress.

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

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