Dollar Drops about 1%

May 23, 2022

The U.S. dollar opened this fourth week of May on a down note, falling 1.1% against the euro, 1.5% and 1.2% versus the New Zealand and Australian dollars, 0.9% relative to sterling, 0.5% against the loonie, 0.3% vis-a-vis the Japanese yen and Mexican peso, 0.8% versus the Turkish lira and 6.4% against the Russian ruble.

Instead of focusing on the coming rise of interest rates, investors at least today are taking away from the need to reduce inflation the inevitability that economic growth will have to shows significantly, if not turn outright negative.

The softer dollar has today been associated with firmer share prices and higher 10-year sovereign debt yields, which compared to Friday show gains of five basis points in the United States, four basis points in Germany, and three basis points in France, Spain and the United Kingdom.

U.S. stock futures have risen around 1%. Share prices in Asia rose 1.0% in Japan but fell 1.2% in Hong Kong and 1.1% in Indonesia. European equities are up 1.0% in the U.K., 0.8% in Germany, 0.7% in Spain but just 0.2% in France.

The prices of oil and gold have advanced so far by 1.0% and 0.9%.

On the geopolitical front,

  • Australia’s Labour Party led by Anthony Albanese beat the incumbent liberal/National conservative coalition led by Scott Morrison in the national election held over the weekend. Whether Labour obtains an outright majority is still indeterminant.
  • Rumors persist that Russian President Putin may be seriously ill.
  • Ukraine President Zelinsky addressed the World Economic Forum, being held live in Davos, Switzerland.
  • U.S. President Biden continues his first trip in Asia as president. He reaffirmed America’s pledge to defend Taiwan from any invasion by China.

The most notable data release in today’s light menu of economic indicators has been the IFO Institute’s monthly German business climate index, which rebounded to a 3-month high in May and elicited the inference of an absence of observable signs of recession and instead surprising “resilience in the face of inflation concerns, material bottlenecks and the war in Ukraine.” The overall reading of 93.0 compares with March’s 14-month low of 90.8 and last June’s 31-year high of 101.8. Sub-indices for current conditions and expectations rebounded to 2- and 3-month highs. Sectoral indices for manufacturing and services were at 3-month highs, while those for construction and trade improved to 2-month highs.

CPI inflation in Singapore in April matched the prior month’s 119-month high of 5.4%. In Hong Kong, CPI inflation settled back 0.4 percentage points to a 3-month low of 1.3%.

Lebanese CPI inflation of 206.3% last month was not quite as high as in March, but Lavian producer price inflation of 29.9% rose to its highest level since at least 2005.

On-year growth in April of 4.7% in Taiwanese retail sales represented a 2-month low, while that of 7.3% in Industrial production was at a 2-month high. The April jobless rate of 3.7% compares with last June’s 138-month high of 4.8%.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

 

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