Weighted DXY Dollar Index Touched an 11-Week High Overnight Ahead of Powell’s Speech Today
August 25, 2023
Fed Chairman Powell’s speech at the annual Jackson Hole Monetary Policy Symposium begins in about 15 minutes. He’s expected to stress the themes that there’s no alternative to the goal of restoring sustained in-target inflation, that more work has to be done, that quite a while longer must pass before officials can even think of cutting rates, and that policy will be driven by evolving data.
Meantime, the dollar overnight peaked several hours ago and is currently up 0.1% versus the euro and sterling. Against the yen, the dollar shows a 0.2% uptick and, at 146.2, suggests that Japanese officials have been intervening to prevent additional slippage in their currency. The dollar is 3.5% and 0.5% above Thursday closing levels against the Turkish lira and Russian ruble.
Ten-year sovereign debt yields are four basis points higher in Germany and France, two bps higher in the U.K. and a basis point firmer in the United States. Asian equities took there cue from yesterday’s difficult U.S. session, with declines of 2.1% in Japan, 1.7% in Taiwan, 0.6% in China and 1.4% in Hong Kong. European stock markets are up around 0.5%, and U.S. key indices opened mixed, with a 1.4% decline in the S&P 500 but rises of around 0.5% in the DOW and Nasdaq. The price of oil strengthened 1.6%, but gold eased 0.3%.
More weak German data were reported. Real GDP was confirmed to have shown no change in the second quarter following declines in three of the previous four quarters. Year-on-year growth was -0.2% in each of the first two quarters of 2023. And the monthly German business climate index, compiled by the IFO Institute, fell 1.7 points to a 10-month low in August of 85.7. Perceived current conditions dropped to a three-year trough, while future expectations sagged to a 9-month low. Deterioration was broadly spread, with manufacturing, services, trade and construction all posting weaker readings than in July.
In other European data news today,
- A 23.8K rise in French unemployment during July was the biggest increase in 27 months.
- Spanish producer prices fell 8.4% over the 12 months through July, their biggest decline in 38 months. Similarly Icelandic PPI inflation was negative (-4.7% after -2.8% in June) for a fifth straight time. Swedish producer prices fell 0.6% on month and 2.1% compared to July 2022, having crested at +22% in July 2021.
- Belgian business confidence printed further below zero at an 8-month low of -14.8.
- Turkish manufacturing business sentiment fell to a 6-month low in August.
Two sets of Japanese price data were released today. Corporate service prices rose 0.5% on month in July, the largest monthly advance since 0.7% in March. This lifted their 12-month increase from 1.4% in June to a 2-month high of 1.7%. Also, Tokyo consumer price inflation in August, which tends to be a leading indicator for the national CPI data series, decelerated to 2.9% from 3.2% in July overall but remained unchanged at 4.0% when excluding volatile perishable foods and energy.
Brazilian consumer confidence rose to a 14-month high in August, and Brazil’s current account deficit shrank on year by 33% to $3.605 billion in July.
U.S. consumer sentiment in August according to the U. Michigan/Reuters index was revised downward by 2.4% to 69.5. This modified level constitutes a partial relapse after improvements frorm 59.2 in May to 64.4 in June and 71.6 in July.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: German IFO index, Japanese corporate service prices, Powell speech today
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