Better-Than-Forecast Chinese Data, Another U.S. Tariff Initiative, and a Speech From Fed Chairman Powell Later Today – Currency Thoughts
Better-Than-Forecast Chinese Data, Another U.S. Tariff Initiative, and a Speech From Fed Chairman Powell Later Today
April 16, 2025
In overnight financial market action, the weighted DXY dollar index depreciated 0.6% and touched a 3-year low some 9.8% below its year-to-date high in mid-January. Dollar declines were pretty much across-the-board including losses of 0.9% against the Swissy, 0.7% versus the Korean won, 0.6% relative to the euro and 0.5% vis-a-vis the yen.
Gold, up 2.6%, hit yet another record high of $3,334.20 per ounce, and Bitcoin and oil went up by 0.6% and 0.9%.
Ten-year sovereign debt yields retreated most sharply in Japan (ten basis points to 1.26%) but also by five bps in Spain, four bps in Germany, France, the U.K. and Italy, but only two basis points in the United States.
Equities mostly lost ground, but the Shanghai Composite resisted the mob, ticking up 0.3% when Chinese President Xi indicated a conditional willingness to talks with the U.S. about trade policy. Otherwise, stock markets fell around 2% in Taiwan and Hong Kong and about 1% in Singapore and South Korea. European stock exchanges are about a half percent lower, while the futures indications for the Nasdaq and SPX are about 1.2% and 0.5% in the red currently.
Chinese real GDP last quarter matched prior quarter’s 5.4% year-on-year reading, beating analyst expectations by 0.3 percentage points (ppts) and exceeding the 2024 average growth rate of 5.0%. Among other Chinese economic statistics out today,
- The 7.7% year-on-year advance of industrial production in March beat expectations by about 2 ppts. This gain was the most in 45 months and up from 5.9% in the first two months of 2025 and stronger than calendar year advances of 5.8% in 2024, 4.6% in 2023 and 3.6% in 2022.
- Retail sales had a similar story. Sales grew 5.9% on year in March rather by the minuscule improvement from a 4.0% increase in January-February combined that analysts were predicting. The 5.9% increase was the most in 15 months.
- China’s jobless rate fell back in March to January’s 5.2% reading after spiking to a 27-month-matching high of 5.4% in February.
- On-year growth in fixed asset investment of 4.2% in the first quarter exceeded last year’s 3.2% average advance.
- Although less than in the final quarter of 2024, capacity utilization of 74.1% was greater than the 73.6% reading in 1Q 2024.
- China’s two chronic economic problems continue to be lackluster personal consumption and a prolonged property market crisis. Home prices prices have been lower than a year earlier every month since July 2023, but the -4.5% reading in March matched the smallest decline in the past nine months.
U.S. retail sales jumped 1.4% in March, the most in 26 months, and were 4.6% greater than in March 2024, constituting a 13-month year-on-year high. In the first quarter as a whole, sales rose 0.3% on quarter and 4.1% on year.
U.S. industrial production fell 0.3% in March but posted gains of 1.3% both in the first quarter and between March 2024 and March 2025. The rate of U.S. capacity utilization feel to a 2-month low in March of 77.8% from 78.2% in February.
Fed Chairman Powell will deliver a lunchtime speech on the economy before the Chicago Economic Club today at 12:30 PM local time.
Another day, another tariff venture revealed by the White House. An examination is currently underway to determine an appropriate tariff on critical materials.
In other data news today, Euroland’s consumer price inflation last month was confirmed at the preliminary estimate and four-month low of 2.2% but just 0.2 percentage points below the March 2024 reading of 2.4%. Core inflation of 2.4% in March was its lowest in 38 months and down from a peak of 10.6% in October 2022. Inflation in the service sector, which had been lagging in the disinflationary process, printed at 3.5%, down from 4.0% at the end of 2024. Separately the February current account surplus in the euro area of EUR 33.1 billion not seasonally adjusted was similar to that of EUR 33.8 billion in February 2024, and the surplus of EUR 417.2 billion over the last 12 reported months was considerably wider than that accrued over the previous dozen month and equal to 2.8% of GDP. The seasonally adjusted surplus in February equaled EUR 34.3 billion.
British consumer prices rose 0.3% on month and 2.6% on year, a 3-month on-year low and a tad lower than analysts were expecting. A 0.5% monthly rise in core consumer prices was the most in ten months, however, and the on-year core inflation rate of 3.4% merely matched expectations.
Japanese core private machinery orders rebounded much more sharply from January’s 3.5% setback with a 4.3% increase in February. Such orders exceeded their year-earlier level by 1.5%.
U.S. mortgage applications, which had spiked 20.5% in the week of April 4, dived 8.5% last week. The four declines in the past five weeks taken together fully neutralized the jump in April’s first week. A 20-basis point week-to-week increase in the 30-year U.S. fixed mortgage rate was the most in 24 weeks.
On the central banking front, interest rate cutting at the Bank of Namibia was paused this month, interrupting a string of quarter percentage point cuts at the four previous bi-monthly policy reviews from a peak of 7.75% maintained from June 2023 until August 2024. Officials had two reasons for leaving their rate at 6.75%. 1) With CPI inflation a percentage point higher than two months earlier, officials noted that “the average inflation forecasts for both 2025 and 2026 have been revised upwards to 4.2 percent and 4.5 percent, respectively, compared to previous forecasts of 4.0 percent and 4.4 percent.” 2)”Global growth prospects have come under
immense downside pressure, due to ramifications of the trade policy shifts in the U.S.”
The Bank of Canada Governing Council, which previously had progressively reduced its key interest rate from a 5.0% peak maintained for 11 months until June 2024 to 2.75% currently, chose not to cut such further at this month’s scheduled meeting. Faced with more questions than answers, a great degree of frustration permeates the explanation of the rate-cutting pause and the accompanying in-depth quarterly Monetary Policy Report.
The Governing Council will proceed carefully, with particular attention to the risks and uncertainties facing the Canadian economy. These include: the extent to which higher tariffs reduce demand for Canadian exports; how much this spills over into business investment, employment and household spending; how much and how quickly cost increases are passed on to consumer prices; and how inflation expectations evolve. Monetary policy cannot resolve trade uncertainty or offset the impacts of a trade war. What it can and must do is maintain price stability for Canadians.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British CPI, Chinese 1Q25 GDP growth, Chinese retail sales and industrial production, Euroland CPI and current account, U.S. retail sales and industrial production
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