Dollar Down as Investors React to Surprisingly Strong U.S. Jobs and Chinese Trade Data
August 8, 2022
All economic upswings end eventually, but better-than-forecast economic data releases on Friday and Saturday have persuaded investors that a downturn in the United States and world economies is not a clear and present danger. U.S. congressional movement closer to a broad bill to counter global warming has also buoyed optimism.
The dollar, which has for some time been lifted by safe-have money flows, fell overnight by 0.9% against the Australian dollar, 0.7% versus the peso and kiwi, 0.4% vis-a-vis the Japanese yen and Swiss franc, 0.3% relative to the loonie, and 0.2% against the euro and DXY weighted index.
Ten-year sovereign debt yields dropped eight basis points in the U.K., six bps in Germany, 3 bps in the U.S., but rose a basis point in Japan.
Bitcoin‘s price rallied 4.2%, and gold firmed 0.4%, but WTI oil settled back 1.8%.
U.S. stock futures point to a rise of about 0.5%. Gains in European stock markets thus far amount to 1.0% in France, 0.8% in Germany, 0.7% in Spain, 0.5% in the U.K. and 0.4% in Italy. A 3.8% rebound in the Taiwanese stock market led Pacific Rim stock exchanges. The Japanese Nikkei and Shanghai Composite indices closed 0.3% higher. India’s market rose 0.8%, but the Hang Seng index lost 0.8%.
No aspect of the U.S. monthly labor market data release on Friday signaled a recession lurking around the corner. Many investors had previously wondered if concerns about growth might lead to smaller rate hike increments. Federal Reserve Governor Michelle Bowman in remarks over the weekend expressed a preference to continue moving by 75 basis points until inflation falls and officials become convinced that it will continue to do so.
Recession fears had not been limited to the U.S. economy. European data trends had been even more worrisome. many developing economies are heavily exposed to rising U.S. interest rates, which will magnify the servicing burden of their foreign debt, and China’s Covid lockdowns have been a further source of worry. But Chinese trade data released over the weekend revealed a record July surplus of $101.3 billion due to the largest on-year advance in exports (18%) since January. China also reported a $32.8 billion increase in its international reserves last month.
A 1.8% year-on-year rise in Japanese bank lending during July was up from increases of 0.9% in the second quarter and 0.4% in the first quarter. However, not all Japanese data reported this Monday were affirming. The Economy Watchers index, which measures the perceptions of service sector workers, slumped to a 5-month low of 43.8 in July from readings of 52.9 in June and 54.6 in May. Also, Japan’s current account swung into deficit in June for the first time since January, printing a minus JPY 132 billion compared to a surplus of JPY 740 billion in July 2021. That much weaker-than-forecast outcome helped whittle the first half surplus to JPY 3.51 trillion from 9.5 trillion yen a year earlier. The seasonally adjusted current account surplus dropped to JPY 3.63 trillion from JPY 5.82 trillion in the second half of 2021.
The Sentix gauge, which measures investor sentiment toward the Euroland economy, recovered marginally this month to a reading of -25.6 after -26.4 in July and -15.8 in June. It was the sixth straight negative result since a reading of 16.6 in February.
Greek consumer prices dropped 1.8% last month, their largest monthly decline in 42 months. The 12-month rate of inflation eased back to 11.5% from a 29-year high of 12.1% in June but remained far above 1.4% in July 2021.
Lithuanian consumer price inflation accelerated from 3.6% in July 2021 to a 310-month high of 21.6% last month.
Norway’s manufacturing purchasing managers index fell 1.4 index points to an 18-month low of 54.6 in July. Industrial production in Norway had fallen 1.7% in June, more than offsetting May’s 1.1% rise and halving its year-on-year increase to a 4-month low of 2.3%.
A 23.0% on-year rise of Danish industrial production during June, in contrast, was the most in over 20 years.
Likewise, the Swiss 2.0% jobless rate in July matched May and June’s results, which had been the lowest since late 2001.
Czech unemployment rose 0.2 percentage points to a 3-month high of 3.3%, and the Czech trade balance swung from a CZK 45 billion surplus in June 2021 to a CZK 12.5 billion deficit in June 2022.
Taiwan, which has lately been menaced by China, had a larger-than-expected $5.03 billion trade surplus in July, while the Filipino trade deficit widened from $3.18 billion in May 2021 to $5.68 billion in May 2022.
Consumer confidence in Indonesia weakened to a 3-month low last month.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: China trade surplus, Fed Governor Michelle Bowman, Japanese current account