Softer Euro Against Dollar and Other European Currencies
February 8, 2022
The dollar rose 0.2% overnight in weighted terms and against the Japanese yen. Sterling and the Swiss franc nearly matched strides with the greenback, but the euro slid on some dovish remarks by ECB President Lagarde and lost 0.4% against the U.S. currency. Lagarde maintained that medium-term inflation expectations remain aligned with the ECB target and predicted that any coming modifications of monetary policy will evolve gradually.
Stock market action lacked direction overnight. In the Pacific Rim, there were overnight gains of 1.1% in Australia and Singapore and of 0.7% in China but a 1.0% drop in Hong Kong and a mere 0.1% uptick in Japan. The Spanish Ibex has risen 1.0% , but German, Swiss, British, and French share prices are narrowly mixed. U.S. equity futures are down somewhat.
Ten-year sovereign debt yields are up four basis points in the U.K., three basis points in the U.S. and Italy, and two basis points in Japan and France. The price of West Texas Intermediate oil relinquished 1.8%, and that of gold is 0.2% softer.
Data releases from Japan this Tuesday revealed
- The first monthly current account deficit in 7-1/2 years. The shortfall of 371 billion yen in December contrasted with a 1.117 trillion yen surplus a year earlier, but the full-2021 surplus of JPY 15.44 billion was similar to the prior calendar year’s surplus of JPY 15.88 billion.
- Dips of 0.2% year-on-year in both real household spending and labor cash earnings during December. The latter item, a measure of wage growth, tumbled 2.2% in inflation-adjusted terms.
- Bank lending grew only 0.6% on year in January, matching the 12-month rates of increase in November and December.
An 8.1% on-year advance in British same-store sales represents an 8-month high and attests to surprising resilience in the face of the Omicron Covid wave.
Likewise, Italian retail sales rose 0.9% in December (most in three months) and by 9.4% on year after a 6-month high on-year advance of 12.4% in November. Sales rebounded from a 5.2% drop in 2020 to a 7.9% rise in 2021.
A 0.3% downtick in Swedish household consumption in December resulted in a 2-month low on-year advance of 6.5%. Swedish industrial orders and industrial production in December were 7.7% lower and a mere 0.1% higher than a year earlier.
Spanish industrial production recorded on-year advances of 1.3% in December and 7.2% in 2021.
Danish industrial production in December was 9.8% greater than a year earlier, and Denmark’s current account surplus that month of DKK 18.0 billion was the widest since DKK 17.2 billion in September.
The French current account deficit widened to an 18-month high of EUR 7.056 billion in December, but the shortfall of EUR 25.8 billion in 2021 was 41% narrower than in 2020 and equal to a manageable 1.0% of GDP.
Switzerland’s seasonally adjusted unemployment rate edged down to 2.3% last month from 2.4% in December and 2.5% in November.
Polish monetary officials are expected to announce another 50-basis point interest rate later today.
Malaysian industrial production rose 1.3% in December, the smallest gain in a sequence of five consecutive monthly advances. Output was 5.8% greater than in December 2020.
Hong Kong’s private sector purchasing managers index swung below the 50 neutral level in January to a 12-month low of 48.9.
U.S. small business sentiment fell in January by 1.8 index points to an 11-month low, reflecting concerns about inflation and the lack of available workers.
The U.S. goods and services trade deficit of $80.731 billion in December was its widest in three months but not quite as much as analysts were predicting. The 2021 deficit of $859 billion, nonetheless, was 27% larger than the 2020 deficit and 49% bigger than the pre-pandemic deficit in 2019. The merchandise trade deficit of $1.091 trillion in 2021 surpassed a trillion dollars for the first time.
The Canadian trade surplus of C$ 2.466 billion in November imploded to a deficit of C$ 137 million in December, but that shortfall was not nearly as large as the C$ 2.088 deficit in the final month of 2020. Exports dropped 0.9% on month in December, whereas imports jumped 3.7%. Canada experienced its first surplus since 2014 in 2021, when such equaled a 13-year high of C$ 6.6 billion.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: ECB President Lagarde, Japanese current account, U.S. trade deficit in 2021