Further Yen Softness
February 13, 2023
In April Japan will be getting its first new governor in a decade, creating a convenient opportunity for an inflection point in the central bank’s ultra-easy monetary policy, which has been out of step with tighter stances adopted in other developed economies as well as developing ones. Nonetheless, the initial comments from the incoming governor, Kazuo Ueda, have been supportive of current policy and so dovish on the whole. In response, the yen is now trading 1.9% below its Friday high including a 0.8% slide overnight against the dollar.
Against other currencies, the U.S. dollar has lost 0.6% relative to the New Zealand dollar, 0.4% versus the Australian dollar, 0.3% against the Swiss franc and sterling and 0.1% vis-a-vis the euro, loonie, and Mexican peso.
The case for more tightening by the Federal Reserve was strengthened by Friday’s report of a 13-month high in the U. Michigan survey of U.S. consumer confidence, which at 66.4 was 6.7 index points higher in February than its end-2022 level.
In the inside-out world created by excessive inflation, good U.S. macroeconomic news has a toxic effect on share prices, which fell last week. Asian stock exchanges picked up that baton this Monday, with drops of 0.9% in Japan, 0.7% in in South Korea, 0.4% in India, 0.3% in Taiwan and 0.1% in Hong Kong. The Shanghai Composite equity index rose 0.7%, in contrast, as the impact of removed Covid restrictions outweighed any fallout from the proliferation of Chinese spying objects getting shot out of the sky.
European stock markets and U.S. stock futures are marginally higher today.
The European Commission published its Winter economic outlook for the EU and Euroland with revised forecasts that no longer embody an early-2023 recession. Real GDP in the euro area is now projected to expand 0.9% on average this year versus a forecast three months ago of only 0.3%. Falling natural gas prices were the main driver of this revision. Among the bigger economies in Euroland, projected GDP growth in 2023 ranges from 0.2% in Germany to 0.6% in France, 0.8% in Italy, 0.9% in The Netherlands and 1.4% in Spain. Projected euro area growth in 2024 was left unrevised at 1.5%. Projected consumer price inflation is forecast to decelerate from 8.4% on average last year to 5.6% this year and 2.5% in 2024. There have been several good developments over the past three months such as improving business confidence and enough price disinflation to convince officials that the cresting point has past, but officials warn that core inflation has broadened and that additional monetary tightening will therefore be necessary.
Ten-year U.S. Treasury, Japanese JGB and German bund yields are steady, whereas the 10-year British gilt yield is up two basis points.
Prices for WTI oil, Bitcoin, and gold are 0.3%, 0.4% and 0.2% softer this morning. This Monday’s data release calendar has been typically light.
Swiss consumer prices jumped 0.6% on month and accelerated half a percentage point in year-on-year terms to 3.3% in January, which is the highest since September and twice the 1.6% on-year pace in January 2022.
Ireland’s construction purchasing managers index printed below 50 for a fourth consecutive month in January but at 47.7 was at a 4-month high versus December’s 5-month low of 43.2.
Driven by hyper-inflation, retail sales in Turkey advanced 4.8% in December (an 18-month high) and by 21.8% compared to December 2021 (a 19-month high).
Turkey’s current account deficit last year of $47.7 billion was 3.2 times greater than than the 2021 shortfall. The Czech current account deficit underwent an even steeper 7.4-fold leap to CZK 380 billion in 2022.
New Zealand’s service sector purchasing managers index rose 1.5 points to a 3-month high of 54.5 in January.
GDP growth last quarter in Singapore got revised a tad lower to just 0.1% on quarter and 2.1% on year. Economic growth in 2022 averaged 3.6%.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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