Dollar Trading at Highest Level Since the First Week of January
February 7, 2023
The softening dollar trend in the final quarter of 2022 had extended into January, but that month’s losses have been mostly reversed in recent days by heightened geopolitical strains between the U.S. and China and even more so by a rise in expectations about how high the federal funds rate will need to be raised in the current tightening cycle. Both matters could get clarification, first when Fed Chairman Powell addresses the Washington Economic Club and tonight when President Biden delivers the annual state of the union address.
Compared to Monday closing levels, the dollar has climbed 0.3% against sterling and 0.2% versus the euro but also settled back 0.6% against the Australian dollar, 0.4% relative to the Japanese yen, 0.3% vis-a-vis the Swiss franc and 0.2% against the kiwi, loonie and Mexican peso.
Ten-year British gilt and German bund yields are 5 and 3 basis points firmer, whereas the comparable U.S. Treasury yield is a basis point lower. Prices for oil and Bitcoin are 1.5% and 1.0% higher. Share prices closed up 0.9% in Indonesia, 0.6% in South Korea, 0.4% in Hong Kong, 0.3% in China but unchanged in Japan. The British Ftse has risen 0.5% so far, but Germany’s DAX is 0.1% softer. Futures trading in U.S. stocks has lifted the Nasdaq 0.4% but left the SPX and DOW hardly changed.
The Reserve Bank of Australia‘s Officials Cash Rate was raised another 25 basis points to 3.35%, its highest level in eleven plus years and up from 0.10% prior to the onset of tightening last May. CPI inflation in Australia reached a 32-year high of 7.8%, and its core pace of 6.9% was also well above the 2-3% medium-term target range. Imported inflation has been augmented by robust domestic demand. Today’s explanation of this latest tightening opines that additional tightening will be required to restore in-target price stability and conspicuously deletes the following phrase from earlier monetary policy statements: “…but is not on a pre-set course.” A more detailed update of the latest thinking of RBA policymakers will be available this Friday in the scheduled publication of the bank’s quarterly Monetary Policy Statement.
In contrast to yesterday’s much better-than-forecast German factory orders data, today’s news that German industrial production had sunk 3.1% on month and 3.9% on year in December was four times worse than predicted. The 12-month decline was the largest drop since last March.
A rise of 0.8% in Spanish industrial production in December was only the second monthly increase since mid-2022 and flipped the year-on-year change to an advance of 0.6%, which was nonetheless much smaller than year-on-year gains of 6.9% last June and 2.9% for 2022 as a while.
Industrial production in Norway (down 0.1%) posted a third straight month-on-month decline in December. An unchanged level from a year earlier ended a two-year streak of year-on-year positive growth.
A 3.9% year-on-year rise in British same-store sales last month was the smallest 12-month increase since October. Britain’s Halifax house price index, which experienced positive month-on-month growth just once in the second half of 2022, stagnated in January and recorded its smallest 12-month increase (1.9%) in over 3 years.
France experienced its largest monthly current account deficit EUR 8.545 billion in December, bringing the 2022 imbalance to EUR 35.5 billion compared to the prior year’s EUR 9.0 billion surplus.
Czech retail sales fell 0.7% on month and 7.3% on year in December.
The Greek trade deficit totaled EUR 38.4 billion last year, wider than the EUR 25.5 billion in 2021.
Real household spending in Japan fell by a considerably larger-than-expected 1.3% between December 2021 and December 2022. A 12-month 4.8% increase in Japanese average cash earnings was the most in 311 months. The upward spike reflected elevated inflation, and the rise in inflation-adjusted earnings was only 0.1%. Asia’s second largest economy’s leading and coincident indices of economic indicators respectively weakened to 24- and 7-month lows in December.
Chinese and Japanese international reserves respectively fell last month by $56 billion and nearly $23 billion to $3.184 trillion and $1.25 trillion.
Filipino CPI inflation unexpectedly rose to a 170-month high of 8.7% in January from 8.1% in December and 3.0% in January 2022.
Armenian CPI inflation settled back further last month to a 10-month low of 8.1% from 8.3% in December and an 11-year peak of 10.3% last June.
After peaking last June at 26.5%, wholesale price inflation in Austria subsided to 13.2% in January, which was also lower than 15.2% recorded in the first month of 2022.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: German industrial production, Japanese real household spending, Reserve Bank of Australia
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