Weighted DXY Dollar Index Climbs Back Above 100 Level
July 20, 2023
Against specific other currencies, the dollar recovered overnight by 0.5% against sterling,0.4% vis-a-vis the Swiss franc, 0.3% versus the Mexican peso, 0.2% relative to the euro and yen, and 0.1% against the loonie and kiwi.
A six-basis point rise in the 10-year U.S. Treasury yield eclipsed today’s one-basis point increases in the comparable German bund and British gilt yields. The Nasdaq futures dropped 0.8% on weaker-than-anticipated quarterly reports from Tesla and Netflix. There’s been lesser movement in the S&P 500 and DOW.
In the Pacific Rim, equities fell 0.9% in China and 1.2% in Japan. In contrast in Europe, the British Ftse, Paris Cac and German DAX are 0.7% , 0.4% and 0.2% firmer.
Bitcoin and WTI oil are 1.0% and 0.3% higher. Gold is 0.2% softer but still above $2,000 per ounce.
The Central Bank of Turkey only lifted the one-week repo rate half as much as forecast. A 250-basis point hike following a 650-basis point increase at the prior June meeting nonetheless puts the rate at 17.0%, which its highest level since 18% in September 2021. The first rate change in 2023 had been a 50-basis point cut in February to 8.50%. After President Erdogan narrowly won reelection in May, he replaced the central bank leadership with a team that went back to using interest rates as a tool to soften aggregate demand and thereby demonstrate a credible commitment to disinflation. Today’s statement from the TCMB reaffirms.
Monetary tightening will be further strengthened as much as needed in a timely and gradual manner until a significant improvement in the inflation outlook is achieved… in addition to the increase in the policy rate, the Committee has made decisions on quantitative tightening and selective credit tightening to support the monetary policy stance.
Turkey’s rate of consumer price inflation already has slowed from 85.5% last October to 38.2% last month but still has a long was to go before aligning with the medium-term target of 5.0%.
Key loan prime rates in China were not cut further at this month’s fixing. In June both the 1-year LPR and the 5-year LPR were reduced by 10 basis points to 3.55% and 4.20% respectively. Those cuts had been the rates’ first change since ones of 5 and 10 basis points in in August 2022. While additional adjustments this month had seemed plausible, Chinese GDP growth last quarter had been reported somewhat faster than assumed, and officials decided to maintain the status quo instead.
Among Thursday data highlights, German producer prices in June fell 0.3% on month and were just 0.1% higher than in mid-2022, the lowest year-on-year rise in 30 months. PPI inflation peaked at 45.8% last September.
French business confidence slid 0.5 points in July and at 99.9 was just 0.2 points better than May’s 25-month trough. Manufacturing sentiment lifted slightly, but the service sector index and gauge for overall French employment fell to 27- and 26-month lows.
Consumer confidence in July improved to a 17-month high in Denmark, remained steady in the Netherlands at a 3-month low, and weakened 5.9% to a 4-month low in Turkey.
Euroland’s current account deficit of EUR 11.3 billion in May was down from EUR 23.9 billion a year earlier. Over the latest 12 reported months, the deficit’s ratio to GDP equaled 0.4% versus 1.3% over the prior 12-month period through May 2022. In seasonally adjusted terms, the current account rose from a surplus of EUR 4 billion in April to EUR 9 billion in May.
Switzerland’s first half 2023 trade surplus of CHF 18.5 billion was 14% wider than a year earlier.
Japan’s customs clearance trade balance swung to a surplus of JPY 43 billion in June from EUR 1.382 trillion in May and JPY 1.375 trillion in June 2022. The JPY 1.775 trillion deficit in 2Q was only about a third of its first-quarter size. And on a seasonally adjusted basis, the deficit shrank 28.3% from JPY 771 billion in May to 553 billion yen in June.
Australia’s jobless rate in June was 3.5% for the fourth time in five months and close to last October’s half-century low of 3.4%. A rise in employment of 109k over the past two report months exceeded expectations. The Aussie dollar was well-bid in the wake of this evidence of labor market tightness.
U.S. data releases today showed
- A 9-week low in new jobless insurance claims of 228k and a 6-week low the 4-week average.
- A 2-month high in the Philly Fed manufacturing survey index, which at -13.5 still signaled negative activity growth.
- 3.3% fewer existing home sales in June than May.
- A marginally larger-than-forecast 0.7% drop in June’s index of leading economic indicators.
Mexican retail sales sank 0.5% on month and slowed to a 2.6% year-on-year advance in May.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Australian labor statistics, Central Bank of Turkey, Euroland current account, French business confidence, German PPI, Japanese trade balance
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