Dollar Trading Near 20-Year High as Markets Digest Data Storm
August 31, 2022
The dollar rose overnight by 0.5% against the Swiss franc and 0.4% versus sterling and continues to hover around parity with the euro.
Equity markets closed down 0.8%, 0.6% and 0.4% in China, Singapore and Japan but climbed 2.7% in India and 1.0% in Taiwan. European stock markets are moderately lower, while U.S. share prices are trying to gain upward traction after recent losses.
Ten-year sovereign debt yields remain in an inclining trend especially in the U.K., where the gilt yield rose 10 basis points today.
The price of gold sunk another 0.8% and is below $1,725 per ounce, and the price of WTI oil dropped 1.4% to near-$90 per barrel. Bitcoin, in contrast, advanced by 2.3% so far today.
Typical of the last business day of the month, today’s session has been chock full of economic data releases.
U.S. private employment growth slowed in half this month, according to the ADP estimate.
Consumer price inflation in the euro area rose more sharply than forecast to a record high of 9.1% in August from 8.9% in July and 3.0% in August 2021. In harmonized terms, inflation compared to a year earlier accelerated to 8.8% in Germany from 3.4%, to 6.6% in France from 2.4% in August 2021, to 9.0% in Italy from 2.5%, to 10.3% in Spain from 3.3%, to 13.6% in the Netherlands from 2.7%, to 10.5% in Belgium from 4.7%, to 9.4% from 1.3% in Portugal, to 9.2% from 3.2% in Austria, to 11.1% from 1.2% in Greece, to 9.6% from 3.3% in Cyprus, and to 7.1% from 0.4% in Malta. Core CPI in the euro area rose to 4.3% last month from 1.6% in August 2021.
Among other released price statistics, German import prices posted a larger 1.4% month-on-month increase in July, but the 12-month rate of rise settled back for a third straight time to 28.9% from 29.9% in June and a record 31.7% in April. Italian producer price inflation climbed 2.8 percentage points in July to match March’s record high of 36.9% or more than three times higher than the 10.4% reading in July 2021. French PPI inflation in July matched June’s two-month high of 27.2%. Belgian PPI inflation of 34.4% extended its descent from April’s record high of 40.6%, but producer price inflation rose in Hungary to 37.4%, and Polish CPI inflation climbed to a 310-month high of 16.1% in August. Filipino PPI inflation in July of 7.9% was the most since 2006.
My takeaways from this plethora of price data releases is that inflation remains way too high for central banker comfort and that even if they do everything right, the return to price stability is going to be a long and winding road.
Japan reported retail sales, industrial production, consumer confidence, housing starts and construction orders figures.
- Retail sales strengthened more than expected in July, rising 0.8% on month (a 3-month high) and 2.4% on year (a 2-month high).
- Industrial production climbed 1.0% in July after a 9.2% leap in June but drops of 1.5% in April and 7.5% in May. Officials characterized the underlying trend as “fluctuating indecisively.”
- Consumer confidence remained very weak with a reading of 32.5 that nonetheless constitutes a 3-month high.
- A 5.4% on-year drop in housing starts and 2.8% rise in construction orders represent the worst readings in twenty and four months, respectively.
The Chinese government-authorized purchasing manager indices in August were at a 2-month high of 49.4 in the case of manufacturing and a 3-month low of 52.6 in non-manufacturing. Readings of 50 separate expansion from contraction.
Canadian GDP estimated monthly from the supply side edged just 0.1% higher in June after stagnating in May, and early evidence suggests a likely modest dip in July. Industrial production rebounded from May’s 0.8% decline with only a 0.2% uptick in June.
Quarterly Canadian GDP advanced 0.8% last quarter, which matched the 1Q result and was equivalent to a 3.3% rise in annualized terms.
Indian GDP was 13.5% greater than a year earlier in the second quarter. While the largest rise since 2Q 2021, the gain fell a tad short of analyst expectations.
Turkish GDP went up 2.1% on quarter and 7.6% on year in 2Q 2022. Danish GDP grew 0.9% versus 1Q and 3.6% compared to the same quarter a year earlier.
German unemployment rose 28k in August, the third increase in a row, and the 5.0% jobless rate was at a 1-year high.
But Brazilian joblessness of 9.1% in July was at a 7-year low.
U.S. mortgage applications fell 3.7% last week, their third weekly decline in a row. The Chicago regional purchasing managers manufacturing sector index, however, edged up 0.1 point unexpectedly to 52.2 in August.
South Korean industrial production contracted 1.3% in July and rose only 1.5% on year, while retail sales in that economy fell 0.3% on month and 1.9% on year.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Euroland CPI, Japanese retail sales and industrial production, USD ADP and Chicago PMI
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