Choppy Trading Conditions – Currency Thoughts
Choppy Trading Conditions
May 14, 2025
The pattern of frequent directional reversals in the dollar and stocks has continued, reflecting the ever-changing details on the tariff front. Monday’s jump in the dollar was followed by losses on Tuesday and Wednesday, including overnight declines in the U.S. currency of 1.4% against the Korean won, 1.0% relative to the Japanese yen, 0.5% against the Swiss franc and Mexican peso, 0.4% vis-a-vis the euro and 0.2% relative to sterling. President Trump’s Middle Eastern tour didn’t generate any significant market-shifting momentum over the past 24 hours, and data releases have been on the light side. Yesterday’s slightly lower-than-expected reported U.S. CPI inflation report was welcomed, but investors still lack clarity regarding the impact of tariffs on prices over the coming six months and whether that wild card will derail central bank interest rate cuts.
While some equity markets in the Pacific Rim closed significantly higher this Wednesday such as Hong Kong (2.3%), Taiwan (2.1%), and China (0.9%), Japan’s Nikkei dipped 0.1%, and European bourses have mixed movements so far today with gains in Italy and Spain, losses in Germany and France and no change in the British FTSE.
The ten-year Japanese JGB yield is two basis points firmer, while comparable yields in Italy and Spain have slipped a bit. The 10-year U.S. Treasury yield stayed flat. The price of WTI oil retreated 1.2%, while those of Bitcoin and gold edged down 0.2%.
Australia’s wage price index rose slightly more than forecast last quarter, climbing by 0.8% versus the final quarter of 2024 and accelerating to a 3.4% year-on-year pace from the prior quarter’s 9-quarter low of 3.2%.
Consumer price inflation in Euroland’s biggest and fourth largest economies was confirmed at the preliminary estimated April figures. In Germany, prices rose 0.4% last month and recorded a 12-month increase of 2.1%, lowest since October and down from 2.6% in December. While food and energy price pressure lessened, service sector price inflation accelerated by 0.3 percentage points to a 3-month high of 3.9%. In Spain, consumer prices went up 0.6% on month but posted the smallest 12-month rate of increase (2.2%) in six months. In the second half of 2022, German and Spanish CPI inflation peaked at 8.8% and 10.8%, respectively.
In Nordic Europe, both Sweden and Finland experienced sub-1% consumer price inflation in April. Sweden’s 0.3% reading was its lowest in 53 months and down from 12.3% at the end of 2022. Finnish consumer price inflation printed at 0.5% for a third straight month, and that figure represents the lowest level since end-202o.
Slovakian consumer price inflation slowed too from a 15-month high of 4.0% in March to a 4-month low in April of 3.7%.
Indian wholesale price inflation dropped below 1% in April to a 13-month low of 0.85%. The food, fuel and manufacturing components each experiences price deceleration.
Japanese corporate goods price inflation of 4.0% in April was at a 4-month low. Import prices on a contract basis sank 2.6% on year but tumbled by a much sharper 7.2% year-on-year when expressed in yen terms due to the currency’s recent appreciation. It is hoped in Japan that a firm yen might mitigate some of the effect of higher foreign tariffs.
A rise of just 280 billion yuan in new Chinese loans last month was the smallest monthly increment since 2005, but on-year growth in China’s M2 stock of money accelerated a full percentage point to a 13-month high of 8.0%.
Indonesian retail sales in March leaped 13.6% on month, most in over two years, and lifted their 12-month rate of increase to a 7-month high of 5.5%.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without expressed permission.
Tags: Australia wage price index, German and Spanish CPI, Indian WPI, Japanese PPI, Swedish and Finnish CPI
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