Softer Dollar As 2-Day FOMC Meeting Gets Underway

September 19, 2023

The dollar slipped overnight by 0.4% against the Canadian, Australian and New Zealand dollars, 0.2% relative to sterling, 0.3% against the peso and 0.1% vis-a-vis the euro and Swiss franc. Dollar/yen is steady.

Share prices fell 0.9% in Japan, 0.7% in Singapore, 0.6% in South Korea, 0.5% in Australia and 0.4% in India and Taiwan. There’s been scant change in European equities or U.S. stock futures.

The 10-year British gilt yield is down five basis points. WTI oil is up 0.9%, and the price of bitcoin rose 1.4%.

The OECD quarterly GDP forecast update is out. Global growth this year was revised upward by 0.3 percentage points to 3.0%, but a downwardly revised 2.7% growth rate is predicted next year. Of not, British growth is very meaguer, 0.3% this year followed by 0.8% in 2024. Indian and Chinese growth average 6.1% and 4.8% over the two years, and U.S. and Euroland growth converge on around 1.2% in 2024.

Minutes from this month’s monetary policy meeting in Australia lent support to the Aussie dollar, revealing that officials at the Reserve Bank of Australia had considered a 25-basis point rate hike but only left such steady in order to permit more time to assess the effect of policy tightening taken so far. Officials remain concerned about the tight labor market and resurgence of world oil prices.

The Bank of Korea’s benchmark interest rate as expected was left unchanged at 3.5%, the level since a 25-basis point hike in January. After two cuts totaling 75 bps in 2020 to a pandemic low of 0.50%, the rate was lifted a total of nine times between August 2021 and January 2023. South Korean growth is running now at only about 1.5%, and CPI inflation has slowed from 5.7% to 3.4%.

Euroland CPI inflation in August was revised down 0.1 percentage point to 5.2%. Core inflation of 5.3% was not changed. There’s still considerable deceleration required to meet target.

Euroland recorded current account surpluses in July of EUR 26.85 billion not seasonally adjusted and EUR 20.9 billion seasonally adjusted. The surplus during the 12 months through July 2023 equaled 0.3% of GDP, down marginally from a surplus equal to 0.5% of GDP over the prior one-year period.

The Swiss trade surplus widened to a 3-month high of CHF 3.215 billion in August due to faster export than import growth.

Portuguese producer price deflation lessened in August. The PPI went up 0.6% on month, shrinking the year-on-year decline to 5.2% from 6.6% in July. August was the fifth consecutive month with a year-on-year drop. PPI inflation there had posted a record high in April 2022 of 28.6%.

Market attention is now focused on the Fed’s rate announcement tomorrow and a slew of other central banks where policy is being reviewed this week.

Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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