Corrective Dollar Move Extended
July 19, 2022
The weighted DXY dollar index slid another 0.8% overnight to a 2-week low and is 2.6% below its recent multi-decade peak. Dollar losses since Monday’s close equal or exceed 1.0% relative to the euro, Swiss franc, Australian dollar, New Zealand dollar and especially the Russian ruble (-5.8%). The dollar also lost 0.6% versus sterling and the Mexican peso, 0.4% against the Japanese yen and 0.2% versus the Canadian dollar. There had been several articles lately calling attention to potential damage of sudden dollar strength for energy importers, countries holding a lot of dollar-denominated debt, and U.S. corporations with extensive offshore-generated profits.
In overnight stock market action this Tuesday, share prices rose 0.7% in Japan, closed unchanged in China, and fell 0.9% in Hong Kong, 0.6% in Australia and 0.2% in South Korea. European share prices are also mixed, with Spain’s market up 1.1% but the German Dax and Paris CAC unchanged and 0.1% lower. U.S. futures point to a rise of about 0.7%, but a similar upbeat signal Monday didn’t prevent an eventual slide during the day.
The ten-year German bund yield climbed three basis points, while its U.S. and U.K. counterparts are one and three basis points lower.
Prices for Bitcoin and WTI oil are 1.1% and 1.8% weaker, while gold has strengthened 0.8%.
Minutes from the July 5th Reserve Bank of Australia Board meeting express concern about the economy’s tight labor market, high rate of inflation, and risk to upwardly-creeping inflation expectations. The notes conclude that the 1.35% official cash rate level after this month’s hike remains too low and that more interest rate increases will be necessary in the future. The tone was echoed in a speech by RBA Deputy Governor Bullock.
British labor market data released today were surprisingly resilient for a country in the midst of a political upheaval and a record heat wave. The jobless rate remained at 3.8% for the third time in the past four months. New jobless claims again fell but by the least in the 16-month-long streak of reductions. Employment soard 296k in the three months to May, and on-year growth in total average weekly wage earnings, although below expectations, remained greater than 6% at 6.2%.
Euroland consumer price inflation in June was confirmed unchanged from the preliminary estimate of 8.6%, a record high. Prices rose 0.8% in June from May’s level. Energy price inflation of 42.0% was at a 3-month high, and food jumped 1.1% on month and accelerated to 8.9% on year versus 0.5% on year in June 2021. The on-year gains of 3.4% in services and 4.3% in non-energy industrial goods were also concerning.
Austrian CPI inflation of 8.7% in June was a percentage point higher than in May and the most in 561 months.
CPI inflation of 7.6% in Bangladesh last month constituted a 107-month high.
The Swiss trade surplus widened 37% between May and June, but the first-half surplus of CHF 16 billion was down from CHF 23.1 billion a year earlier.
Hong Kong’s jobless rate fell to a 4-month low of 4.7% in June.
U.S. housing starts and building permits will be reported later today. Covid numbers continue to rise in the United States but are being generally ignored by the public. Juan Soto won the home run derby.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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