Dollar Slides Back to End-2024 Levels
January 6, 2025
After rising in the initial business days of January, the U.S. currency hit a big bump overnight, dropping 1.4% against the Mexican peso, 1.1% versus the Australian and New Zealand dollars, 0.9% versus the Canadian dollar and euro, 0.8% relative to the South Korean won and sterling, 0.7% vis-a-vis the Swiss franc, but just 0.3% against the Japanese yen. The weighted DXY dollar index is 1.3% below last week’s high.
Asian stock markets kicked off the first full week of the new year experiencing widely divergent performances, with losses of 2.8% in Taiwan, 1.6% in India, 1.5% in Japan and 1.2% in Singapore but gains of 1.2% in Indonesia and 1.5% in Japan. European share prices are higher, led by gains of 1.8% in France, 1.6% in Italy and 1.2% in Germany.
Tech companies have led a pre-open advance of U.S. stock futures. There continues to be a marked divide between the desired economic policy goals of incoming tech advisors to President-Elect Trump and his predominant MAGA base, and market participants are unsure which side will get its way ultimately.
Ten-year sovereign debt yields are up four and two basis points in Japan and Germany. Alternatively, the 10-year British gilt yield is flat, and the 10-year U.S. Treasury yield has dipped two basis points.
With the dollar relinquishing gains late last week, the price of bitcoin has climbed 0.9%, while gold is only 0.1% firmer. WTI oil rose 0.7% overnight.
December composite and service sector purchasing manager surveys have dominated Monday’s data release menu. The most impressive of these reports involves Spain, where the services PMI jumped 4.2 points to a 20-month high of 57.3. This was associated with a 21-month high composite score of 56.8, but this good news came also with unwelcome evidence of revived inflationary pressure.
Among other members of the euro area, Italy’s composite PMI bounced off of November’s 13-month low of 47.7 to a near-neutral score of 49.7, and the final readings for the German and French composite PMIs of 48.0 and 47.5 were each at 2-month highs and stronger than their preliminary estimates. Euroland as a whole had a 2-month high composite PMI of 49.6, but with with the most elevated service price measure in seven months. Demand continues to trend weakly, and order backlogs are still diminishing.
The British composite PMI, a 14-month low of 50.4, barely stayed above 50 and particularly signaled troubles in the labor market.
In Japan, a 3-month high services PMI of 50.9 did not prevent the composite (services and manufacturing) figure from dropping to a 3-month low of 50.5.
Australia’s composite PMI printed at 50.2 for a third straight month.
China’service sector PMI reading of 52.2 showed more strength than expected, but its composite index fell to a 3-month low nonetheless.
India‘s composite and service PMI readings were each at 4-month highs, respectively 59.2 and 59.3.
Brazil’s composite and service-sector PMI scores of 51.5 and 51.6 were their lowest since December 2023 and down around 4 points each since September.
Non-oil purchasing manager indices fell to 8- and 2- month lows of 48.1 and 58.4 in Egypt and Saudi Arabia, but the U.A.E. index rose 1.2 points to a 9-month high of 55.4.
The private PMI readings in Singapore dropped 1.4 points to a 17-month low of 51.5, while Hong Kong‘s private PMI edged down 0.1 point to a 3-month low of 51.1. In South Africa, the PMI moved under the 50 neutral level to a 5-month low of 49.9.
In other data news out today, Euroland’s Sentix gauge of investor confidence fell to a 14-month low this month.
Paralleling the ominous upturn of inflationary pressure in Europe reflected in the purchasing manager reports, the initial estimate of 2.6% German CPI inflation last month exceeded analyst expectations and was up from 2.2% in November, 2.0% in October, and 1.6% in September.
Turkey’s trade deficit narrowed from $106 billion in 2023 to $82 billion last year.
Swiss retail sales dipped 0.1% in November and were just 0.8% above the level a year earlier.
British car sales rose 2.6% last year but were 0.2% fewer in December than at the end of 2023.
Mexican consumer confidence weakened to a 5-month low in December.
Vietnamese consumer price inflation edged up to a 4-month high in December of 2.9%, still two percentage points below the January 2023 peak of 4.9%.
In Kazakhstan, CPI inflation last month of 8.6% was its highest since July but down from 21.3% in February 2023.
The Bank of Israel’s policy interest rate as expected was left unchanged at 4.5%. In the space of 13 months from April 2022 to May 2023, such was lifted from 0.10% to a peak of 4.75%. There has been only one subsequent cut of 25 basis points, and that occurred a year ago. Israeli inflation of 3.4% remains above the central bank’s 1-3% medium-term target range.
Canada’s composite and service-sector purchasing manager indices of 49.0 and 48.2 in December were below the 50 neutral level for the first time since September when such printed at 47.0 and 46.4.
Among Group of Seven economies (U.S., Germany, France, Italy, U.K., Canada and Japan), the U.S. S&P Global PMIs retained their top position with December readings of 55.4 composite and 56.8 in the services survey. These scores represent 32- and 33-month highs. In contrast to the Republican characterization of a floundering U.S. economy, a spin that became a credible alternative narrative, President-Elect Trump will be inheriting a solid landscape, which is all the more surprising given the consensus a year ago that a recession was likely to commence sometime during 2024. If one looks only at manufacturing, however, the thumbs-down assessment does carry some merit, but the same can be said about other industrial economies. The U.S. manufacturing PMI for December, released last Thursday, printed below the 50 breakeven threshold at a 2-month low of 49.4. That reading still exceeds those of Euroland (45.1) and the U.K. (47.0). U.S. factory orders in November were 0.4% lower than a year earlier.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Israel, composite and service PMIs, German CPI, Turkey's trade deficit
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