News of Likely Congressional CR Deal to Avert Government Shutdown Outweighs Impact of Further Weak Data and Escalated Verbal Trade War – Currency Thoughts
News of Likely Congressional CR Deal to Avert Government Shutdown Outweighs Impact of Further Weak Data and Escalated Verbal Trade War
March 14, 2025
Friday’s positive developments outweighed downside news in the market trenches.
- Overnight moves in the dollar were mixed, as the greenback gained 0.6% against the yen, 0.4% versus the Swissy, and 0.1% vis-a-vis sterling but fell by 0.9% against the peso, 0.7% relative to the kiwi, 0.5% versus the Aussie dollar and 0.4% against the Canadian dollar.
- The Nasdaq, SPX and DOW recovered 1.3%, 1.0% and 0.6% from recent steep losses. All four of Euroland’s four largest stock markets are up more than 1.0% so far, and the British Ftse is 0.8% stronger. In the Pacific Rim earlier, share prices closed up 2.1% in Hong Kong, 1.8% in China, 0.7% in Japan, and 0.5% in Australia and New Zealand but lost 2.0% in Indonesia.
- Bitcoin’s price rallied 2.8%. Gold is 0.3% firmer at $2,999 per ounce, and WTI oil strengthened half a percent.
- Ten-year sovereign debt yields climbed five basis points in the United States and Germany, three bps in France and two basis points in the U.K., Italy and Spain but slid back two basis points in Japan.
Senate Republicans are lining up behind President Trump’s plan for a continuing resolution that will yield him immense power to steer legislative authority his way over coming months and have pulled in enough democrats to likely prevent a shut down of the federal government this weekend.
The rhetorical heat behind the Trump-initiated global trade war escalated further over the past 24 hours.
The University of Michigan/Reuters monthly index of U.S. consumer confidence took another big dive in March, dropping another 6.8 points to a 28-month low of 57.9, according to preliminary figures. Its 26.1-point slide so far this quarter was the steepest compressed drop since a 15.2-slide between June and August 2021, but that earlier swoon occurred at a more optimistic starting point than the current one.
Several disappointing data releases occurred today in Great Britain. Monthly GDP unexpectedly dipped 0.1% in the first month of 2025 and also posted a smaller-than-forecast 1.0% 12-month rate of increase, which was the smallest in four months. A 0.9% monthly slide in industrial production that month was the largest drop in nine months, leaving IP 0.9% below the January 2024 level. British construction output was up only 0.2% year-on-year.
Russia’s $7.12 billion trade surplus in January was down from $10.1 billion in December and the smallest January surplus in two decades.
Chinese net foreign direct investment resulted in an outflow of $20.4 billion in January-February following a $27.1 billion outflow in 2024. On-year growth in Chinese M2 money of 7.0% in February matched January’s 4-month low.
Brazilian retail sales dipped 0.1% in January but were 3.1% above their year earlier level.
German consumer price inflation in February of 2.3% matched the preliminary estimate and January’s 2-month low but exceeded last September’s 45-month low of 1.6%. Core inflation fell 0.2 percentage points to a 5-month low of 2.7%, including a 10-month low of 3.8% in the services component.
Likewise, French and Spanish final estimates of CPI inflation matched initial figures. France’s 0.8% pace was the lowest in 48 months and down from 1.7% in January and a 333-month high in February 2023. Spanish CPI inflation of 3.0% last month was at an 8-month high, but core inflation in Spain receded 0.2 percentage points to a 38-month low of 2.2%.
Polish CPI inflation of 4.9% last month matched January’s 3-month high but was well above last March’s 62-month low of 2.0%.
Slovakian CPI inflation eased to 3.8% in February from a 13-month high of 3.9% in January.
Finland posted a 12-month consumer price rise of only 0.5% last month, down from a peak of 9.1% in December 2020.
Brazilian producer price inflation, which peakaed at 33.8% in mid-2021 and had been below zero percent from March 2023 to April 2024, boomeranged all the way back to 9.7% in January 2025.
The Central Reserve Bank of Peru‘s policy interest rate was left steady at 4.75% at this month’s review. From a peak of 7.75% from January 2023 until an initial cut of 25 basis points in September 2023, the rate was cut in 25-basis point increments to 6.75% at end-2023 and the current 4.75% at this past January’s review. Only at the June 2024 monthly meeting in that sequence did this normalizing trend get paused. The pause today matches last month’s decision and was less motivated by Peruvian inflation, which at 1.5% overall and 2.1% on an underlying core basis remains amply low, than the global environment.
While the outlook for global economic activity points to moderate growth, the risks to global economic activity have increased due to the high uncertainty regarding the impact of restrictive measures on international trade. In this context, high volatility has been observed in financial markets.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British GDP and industrial production, German and French CPI inflation, U.S. consumer confidence, U.S. Continuing Resolution bill
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