Dollar Well-Bid Ahead of Tomorrow’s FOMC Rate Hike and Today’s PPI Report

June 14, 2022

The weighted dollar is trading just a tad below’s yesterday’s strongest reading since November 2002.

Compared to closing levels in NY on Monday, the dollar has strengthened 0.5% against sterling and Mexican peso, 0.4% versus the Australian dollar, 0.3% relative to the Canadian dollar, 0.2% versus the kiwi, and 0.1% vis-a-vis the Japanese yen. The greenback alternatively slipped 0.4% versus the euro and Swiss franc, 2.2% against the Russian ruble, and 0.3% relative to the Chinese yuan.

Equities continued to slump in Asia and Europe, but U.S. futures were flat just prior to the release of May U.S. producer price data.

Ten-year sovereign debt yields had climbed six basis points in Italy, 5 bps in Spain, and 3 bps in Germany and France but had settled back two basis points in the United States and Japan.

Bitcoin fell to as low as $20,835 and is currently 3.2% below yesterday’s close. Last November, such was priced above $67,000.

The prices of WTI oil and gold alternatively are 0.5% above and 0.5% below Monday closing levels.

Indian wholesale price inflation accelerated 0.8 percentage points to a 282-month high of 15.88% in May.

Portuguese CPI inflation also climbed 0.8 percentage points in May to 8.0%, most in 351 months and up from 1.2% in May 2021.

Swedish CPI inflation of 7.3% last month was up from 6.4% in April and four times greater than 1.8% back in May 2021.

Finnish CPI inflation of 7.0% in May was at a 267-month high and above 5.7% in April and 2.2% in May 2021.

German wholesale price inflation of 22.9% in may was just slightly lower than April’s 23.8% reading, which had been the most ever. And German CPI inflation of 7.9% matched the preliminary estimate, which was the most since the first OPEC-engineered oil price shock in early 1974.

British on-year average weekly earnings growth in February-May settled back to 6.8% from 7.0% in 1Q 2022. That’s not enough to keep pace with U.K. CPI inflation.

Food price inflation in New Zealand was also at 6.8% in May.

Just in: U.S. producer prices registered a 0.8% month-on-month advance in May, double April’s monthly rise but in line with expectations. Compared with the same month a year earlier, producer prices (+10.8%) were up at least 10.0% for a sixth straight month but down from 10.9% in April and 11.5% in March. Excluding food and energy, the core PPI inflation rate (+0.5% on month and +8.3% on year) were a bit less than feared. Food prices were unchanged on month, but gasoline costs leaped 8.4% and overall energy prices climbed 5.0% on month and 45.3% on year.

Small business sentiment in the United States dipped another 0.1 index point to a 25-month low of 93.1 in May, having crested at 102.5 in June 2021.

Investor sentiment regarding the German and Euroland economic outlooks rose to four-month highs in June ((each at -28) but remain very negative as they have been since plunging in March, according to the monthly ZEW surveys. Continuing risks stem from the sanctions imposed on Russia, China’s response to the pandemic, and tightening monetary policies at the European Central Bank and elsewhere around the world.

Australian business confidence fell 4 index points to a 4-month low in May and was accompanied by a 2-month low in the measure of business conditions.

South African business confidence sank to a 20-month low in May.

Japanese industrial production in April was revised to a slightly greater monthly drop of 1.5%, resulting in a 4.9% drop compared to April 2021’s level. Industrial production had risen 0.6% quarter-on-quarter in 1Q 2022 and by 5.6% on average in 2021. Industrial capacity in April fell 0.4% on month and 1.2% on year, and capacity utilization was unchanged from March and 6.6% below its year-earlier level.

Factory output in Hong Kong dropped 1.2% year-on-year last quarter following a 5.8% on-year advance in the final quarter of 2021. The sector has been hurt by China’s Covid lockdown.

Chinese foreign direct investment in January-May was 17.3% higher than a year earlier compared to a 14.9% rise in full-2021.

The Central Bank of Armenia left its refinancing rate steady at 9.25%, which is just marginally above that economy’s latest year-on-year CPI inflation pace. The refinancing rate was last increased in March and is 150 basis points above its end-2021 level and more than double the 4.5% pandemic level low established after a cut in June 2020.

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



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