Heavy Diet of Price and GDP Growth Data – Currency Thoughts
Heavy Diet of Price and GDP Growth Data
August 14, 2024
The dollar had lost 0.4% against the euro and 0.2% versus the Swiss franc and Chinese yuan an hour and a half into the U.S. trading day this Wednesday. Larger net movements of -1.0% and +1.0% had been clocked against the Mexican peso and New Zealand dollar, while values of the yen, sterling and Canadian dollar had barely changed.
Ten-year sovereign debt yields have fallen by seven basis points in the U.K., three basis points in Japan and the United States, and a single basis point in Germany, France, Spain and Italy.
Equity markets closed up 2.1% in New Zealand, 1.1% in Taiwan and Indonesia, 0.9% in South Korea and 0.6% in Japan but fell by 0.6% in Japan, 0.6% in China and 0.4% in Hong Kong. Share prices have risen somewhat in Europe but are edging lower in the U.S..
Prices for Bitcoin, gold and oil are 1.8%, 0.5% and 0.2% lower.
Today’s menu release menu includes an abundance of price date and GDP reports.
U.S. consumer price increases in July of 0.2% compared to June and 2.9% year-on-year were marginally less than forecast but not enough so to move markets. Total CPI inflation and core CPI inflation of 3.2% constitute 40- and 39-month lows. The shelter component, up 0.4% on month, continues to resist downward pressure, but this report, viewed in total, did nothing to detract from the strong likelihood that the Fed will start reducing its interest rate at next month’s scheduled meeting.
British consumer prices fell 0.2% on month in July but posted a 3-month high of 2.2% compared to their year-earlier level. That’s down from a peak of 11.1% seen in October 2022 and associated with a 34-month low of 3.3% among core components of the index. British producer output price inflation slid to a 4-month low of 0.8%, but producer input inflation of 0.4% moved above zero percent for the first time since May 2023.
Swedish CPI inflation of 2.6% in July matched June’s 33-month low and was down from 9.3% in July 2023.
The 41-month low preliminary estimate of French consumer price inflation in July has been left unrevised at 1.0%. Such crested at 9.1% back in December 2022.
Polish producer price inflation in July has likewise been confirmed at the preliminary estimate of 4.2%, which represents a 7-month high.
Wholesale price inflation in India decelerated from a 4-month high 3.36% in June to a 3-month low of 2.04% in July. A 9-month low reading for food outweighed 16- and 17-month highs for the fuel and manufactured goods components.
There’s been a 25-basis point reduction in the Reserve Bank of New Zealand’s official cash rate to 5.25%. Its the first easing of the cycle and was not widely expected by analysts. “Surveyed inflation expectations, firms’ pricing behavior, headline inflation, and a variety of core inflation measures are moving consistent with low and stable inflation,” according to a released statement. As in many economies, service sector prices continue to lag other items in the disinflationary process. The CPI target of the RBNZ is a range of 1-3%, and inflation last quarter of 3.3% was down from 4.0% in the first quarter and 7.3% in the second quarter of 2022. New Zealand stock market rallied but the kiwi fell following announcement of the rate cut. The OCR had been at 5.50% since a 25-basis point increase in May 2023 but remains far above the pandemic low of 0.25% maintained from March 2020 until October 2021.
Euroland GDP grew 0.3% on quarter and 0.6% on year in the second quartet. These preliminary estimates match the flash indications a month ago and were associated with employment growth of 0.2% versus 1Q and 0.8% versus a year earlier.
Industrial output in the euro area disappointed analysts, however, dipping 0.1% on month in June versus the consensus forecast of +0.5%. Compared to a year earlier, production sank 3.9%, the most since February, and average industrial production in the second quarter was o.4% weaker than in the first quarter.
Some European economies experienced GDP contractions last quarter, including Germany (-0.1% versus 1Q), Latvia (-1.1%), Sweden (-0.8%), Hungary (-0.2%). Although positive, economic growth in Italy, Belgium, Austria, Cyprus, Portugal, Slovakia, and Romania was weaker than the growth pace during the prior quarter.
South African retail sales increased 1.6% in June and posted the largest year-on-year increase (4.1%) in 23 months. In contrast, Brazilian retail sales fell 1.0% on month in June, resulting in a pronounced drop of their year-on-year advance from 7.8% in May to 4.0% in June.
U.S. mortgage applications shot up 16.8% last week extending a strong 6.9% rise in the prior week, as mortgage rates stayed at attractively low levels.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British CPI, Euroland GDP and employment growth, India WPI, Reserve Bank of New Zealand, U.S. consumer prices
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