Dollar Hit an Air Pocket Right after Powell Testimony on Tuesday but Fairly Steady Overnight

January 13, 2022

The dollar didn’t handle Chairman Powell’s reconfirmation hearing or yesterday’s CPI release very well and is currently trading below Tuesday highs by 1.9% against the Australian and New Zealand dollars as well as versus the Turkish lira. There are also losses over this period of 1.6% against the Canadian dollar, 1.4% relative to the Swiss franc, 1.2% vis-a-vis the euro, 1.1% against sterling and 1.0% versus the Japanese yen. The DXY weighted dollar index is 1.7% lower than a week ago but just 0.1% lower than its closing on Wednesday. Overnight dollar losses have been limited also to just 0.1% against the euro, yen and Canadian dollar.

Investors are keen to see how the dollar responds to U.S. producer price and jobless claims data due just an hour from this writing. Was dollar softness on Tuesday-Wednesday just a hiccup, or did it herald a new direction? The weighted dollar remains 5.8% above its 52-week low seen last May and much closer (2.3%) to its one-year high touched seven weeks ago.

Stock market action overnight saw drops of 1.0% in Japan and 1.2% in China but comparatively insignificant net movement in other key markets. U.S. equity futures are showing a marginal uptick following yesterday’s slight rise and the bigger upward move seen on Tuesday. In addition to U.S. PPI and jobless claims releases, market participants are looking forward to hearing Lael Brainard’s confirmation hearings before the Senate Banking Committee this morning.

Neither sovereign debt yields nor the prices of commodities such as oil and gold moved much on net overnight, and data releases prior to the U.S. open have been few and inconsequential.

Greek CPI inflation of 5.1% in December was 0.3 percentage points above November’s result and the most since 2010. Greek CPI inflation was just 2.2% as recently as September and negative prior to last May.

South Korean export and import prices recorded December-over-December leaps of 23.5% and 29.7%. The silver lining is that those advances were smaller than those in November or October.

A 40.5% on-year increase in Japanese machine tool orders last month was the smallest since February. Japanese M2 money growth of 4.0% on year in the fourth quarter of 2021 was down from 6.4% for last year as a whole and 6.5% in 2020.

Chinese foreign direct investment increased 14.9% in 2021, more than double the 6.0% rise in 2020.

A 1.9% monthly jump in Italian industrial production in November boosted the increase from the same month a year earlier by more than threefold to 6.3%, a 4-month high. The increase was much more than predicted.

Czech retail sales grew 13.2% on year in November, the most in two decades, and industrial production swung from a year-on-year drop in each of the three prior months including by 4.9% in October to a 4-month high 1.6% advance in November.

Between November 2020 and November 2021, Turkish retail sales and industrial production soared 16.3% and 11.4%.

New Zealand building permits rose 0.6% on month and 26% on year in November.

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

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