Dollar, U.S. Stock Futures, 10-Year Treasury Yield and Prices of Oil and Bitcoin Down Marginally as Another Frenzied Week Winds Down – Currency Thoughts
Dollar, U.S. Stock Futures, 10-Year Treasury Yield and Prices of Oil and Bitcoin Down Marginally as Another Frenzied Week Winds Down
March 21, 2025
Market Movements Overnight: The weighted DXY dollar index edged 0.1% lower overnight, with dips of 0.2% against the Swiss franc but no change versus the yen or euro. In pre-open futures stock trading, major U.S. indices softened 0.3-0.4%. A three-basis point additional drop in the 10-year Treasury yield has been matched by the movement in 10-year German, French and Spanish sovereign debt yields, while those in the U.K. and Japan ticked up two and one basis points, respectively. There was another very large decline in Hong Kong’s Hang Seng index (-2.3%), and stock markets also tumbled 1.3% and 0.8% in China and Taiwan. European equities are also in the red but to a lesser degree. Prices of oil and bitcoin slid 0.4% and 0.1% overnight. Today’s biggest currency move has been a 0.6% drop in the Turkish lira.
The mood of financial markets around the world and how was succinctly captured in the opening words of the South Africa Reserve Bank statement following a scheduled decision to leave its repo rate unchanged at 7.5%.
The world economy is experiencing extreme levels of uncertainty. Trade tensions have escalated, and longstanding geopolitical relationships are shifting abruptly. In these circumstances, the global economic outlook is unpredictable.
So how can central bankers react to such upheaval? In their case, an interest rate easing course that began last September and thus far has accumulated to 75 basis points has been paused. The statement explains its decision as follows:
For several quarters we have enjoyed rising confidence in South Africa, with a smaller country risk premium and lower bond yields. However, the global economy is not on a stable footing and there are also domestic uncertainties, which put these favorable trends at risk. This calls for a cautious policy approach.
Monetary officials at the Central Bank of Russia also wrapped up a monetary policy review today. They left the policy rate unchanged at 21%, after having raised such from 7.5% in July 2023 to 16% by end-2023 and by a further 500 basis points between July and October of last year. More importantly, officials explained that while inflation (currently up to a 2-year high of 10.1%) remains well above the medium-term target of 4%, the policy rate may now be high enough.
The Bank of Russia estimates that the achieved tightness of monetary conditions creates the necessary prerequisites for returning inflation to the target in 2026.
While it may be quite a while further before officials feel comfortable reducing the extent of monetary restraint in Russia, officials believe that for now they can wait and monitor if the lagged impact of tightening done last year will indeed steer inflation toward where they want it to go. Left unsaid is the emergence of the United States as a friend wanting to negotiate an end to the war with Ukraine that yields enough to make Russia look a winner and to additionally bring a better economic balance between Russian aggregate demand and the country’s stretched capacity to meet that demand.
Today’s main economic data release was Japanese consumer prices in February. Overall inflation settled back from January’s 24-month high of 4.0% to 3.7%, but core CPI excluding fresh food of 3.0% slightly exceeded market expectations, and the CPI ex-food & energy index edged up 0.1 percentage point to an 11-month high of 2.6%.
Other price data reports released today included a 13-month low of 1.5% in Malaysian consumer price inflation; a 4-month low in Irish wholesale price inflation of -0.5% in February; a 21-month high in Latvian producer price inflation, which swung from -0.5% in January to +5.0% in February; a 3-month PPI inflation low of 1.5% in South Korea; and a 16-month high in Slovenian PPI inflation of +0.5%.
Euroland’s seasonally adjusted current account surplus narrowed slightly in January to a still-substantial EUR 35.4 billion. The surplus of EUR 407.9 billion over the last twelve reported months equaled 2.7% versus 1.9% for the surplus in the previous 12 months to January 2024. Last month’s unadjusted surplus of EUR 13.2 billion constituted an 8-month low.
French business confidence improved to a 5-month high in March on the strength of a rebound in the labor market, brightening conditions in retail, which improved to a 6-month high, and stability in services and construction. These favorable factors were mitigated partly by manufacturing, whose index fell to a 2-month low of 95.9 were a value of 100 aligns with the long-term average.
The orders sub-index of Britain’s monthly industrial trends survey slid a point to a 2-month low of -29, which remains far from the long-term mean value of -15.
Several economies reported measures of consumer confidence this Friday. Turkish consumer sentiment improved to a 22-month high of 85.9 in March from 82.1 in February and 75.9 last July. Czech and Slovenian consumer confidence rose to 3- and 2-month highs in March, but Slovenia’s reading of -28 was not much better than February’s 14-month low of -31. Consumer confidence weakened this month in Denmark to a 23-month low, Belgium to a 2-month low, and the Netherlands to a 17-month low. Finally, in Great Britain consumer sentiment recovered a point to a 3-month high of -19 in March but was far removed from January’s 14-month low of -22.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Central Bank of Russia, Euroland current account, French business confidence, Japanese CPI, South Africa Reserve Bank
ShareThisYou can leave a response, or trackback from your own site.
