Continuing Firestorm of Trump Statements Overwhelms an Otherwise Busy Day of Data Releases and Central Bank Decisions – Currency Thoughts
Continuing Firestorm of Trump Statements Overwhelms an Otherwise Busy Day of Data Releases and Central Bank Decisions
February 5, 2025
The dollar fell overnight by 0.2% against the euro, Swissy, sterling and Canadian dollar but jumped 1.2% versus China’s yuan and 0.8% relative to the Mexican peso.
In other financial market action, Nasdaq futures took a notable hit. Share prices in the Pacific Rim closed up 1.6% in Taiwan, 1.1% in South Korea and 0.5% in Australia but down 0.9% in Hong Kong and 0.7% in China and Indonesia. Net movement so far in the British Ftse, German Dax and Paris Cac are narrowly mixed. Ten-year sovereign debt yields dropped seven basis points in the U.K., 5 bps in the U.S. and Italy, and 4 bps in Germany, France and Spain. In contrast, the 10-year JGB yield rose another basis point to 1.27%. The price of WTI oil is 1.0% weaker, while those of Bitcoin and gold have rebounded 0.8% and 0.4%.
President Trump’s latest thought experiment is to empty the people from Gaza, let the U.S. transform the land into a riviera resort, and impose an enduring and comprehensive peace to the Middle East.
The U.S. goods and services trade deficit ballooned almost 25% on month in December to a 34-month high of $98.43 billion. A deficit in 2024 of $918 billion was 17% wider than in 2023. For just goods, the deficits were $123 billion in December and $1.2 trillion in 2024.
Canada’s trade balance swung into surplus in December (C$ 708 billion) for the first time in 15 months. The C$ 102.3 billion bilateral surplus with the United States in 2024 was a tad smaller than that of C$ 108.3 billion in 2023.
ADP’s monthly estimate of a 183k increase in private sector U.S. jobs last month was 22% larger than analysts were anticipating in spite of a 13k estimated drop in manufacturing.
U.S. mortgage applications grew 2.2% last week, reversing the prior week’s decline.
Producer prices in the euro area rose 0.4% in December and were unchanged from a year earlier, marking the first non-negative year-on-year change in 20 months.
A variety of service sector and composite manufacturing and services purchasing manager surveys from January were reported. Euroland‘s composite PMI was unrevised at a 5-month high of 50.2 despite a 2-month low of 51.3 in the services index. The German composite PMI moved above the neutral 50 level to an 8-month high of 50.5, while the French and Italian composite measures stayed below 50. Inflationary pressure picked in in the euro area.
The Japanese composite and service sector PMI readings of 51.1 and 53.0 rose to their best levels since September. Britain‘s composite index of 50.6 was at a 3-month high in spite of a lower service sector reading. China‘s composite and service sector PMIs matched at four-month lows of 51.1. Although at a 14-month low, India’s composite PMI score of 57.7 signals robust growth with steady inflation. So much for sanctions against Russia, whose composite and service PMIs improved to one-year highs of 54.7 and 54.8. Brazil‘s composite PMI tumbled from 51.1 to a 45-month low of 48.2 in January. Australia‘s composite PMI of 51.1 was at a 5-month high. Sweden‘s composite and services PMI (50.9 and 50.1) were their lowest since September.
Just In: The revised S&P Global U.S. composite PMI in January was marked down to 52.4 versus 55.4 in December and was the lowest since last April yet accompanied by faster inflation. The final services PMI (52.7) was also at a 9-month low.
Canada‘s composite and service-sector PMIs last month printed at 2-month highs of 49.5 and 49.0.
The private PMI readings of Hong Kong (51.0) and Singapore (49.9) in Janaury are their lowest in four and twenty-three months, respectively.
The U.A.E. non-oil purchasing managers index dipped 0.4 points to a 2-month low of 55.0.
Lebanon‘s manufacturing PMI got a boost from the ceasefire with Israel, rising 1.8 index points to a 140-month high of 50.6.
South Africa‘s Std Bank-compiled PMI sank 2.5 points, in contrast, to a 42-month low of 47.4.
Filipino producer price inflation in January matched December’s 4-month high of 2.9%, having previously dropped from 8.7% in January 2023 to 1.9% last September.
South Korean CPI inflation rose to a 6-month high in January but of only 2.2%.
GDP in Indonesia grew by similar rates of 5.03% in 2024 and 5.02% year-on-year last quarter.
French industrial production fell 0.4% in December and by 0.6% last quarter.
Three central banks announced interest rate decisions today:
The National Bank of Poland‘s rate was left unchanged at 5.75% as expected. A duo of cuts in September and October of 2023 cut the rate to that level from 6.75% maintained for the preceding year. Polish CPI inflation of 4.7% is still above the 1.5-3.5% target range.
The National Bank of Moldova‘s policy rate was raised by 90 basis points today to 6.5%, its highest level since June 2023. Today’s is the second increase this year following one of 30 basis points in January. The rate had been at 3.6% from May 2024 previously. CPI inflation doubled to 7.0% by December from a low of 3.3% last May.
The Central bank of Iceland‘s key interest rate was cut 50 basis points today to 8.0%, its lowest level since May 2023 and down from a peak of 9.25% maintained from August 2023 until an initial easing last October. Icelandic consumer price inflation last month of 4.6% was at a 39-month low and down from 10.2% in February 2023. Although continuing disinflation is projected, the target of 2.5% shows the need to exit the restrictive monetary stance in a carefully slow manner.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Central Bank of Iceland, Euroland PPI inflation, National Bank of Moldova, National Bank of Poland, service sector PMI surveys, U.S. and Canadian trade balances
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