Price Data and U.S. Policy Opacity – Currency Thoughts
Price Data and U.S. Policy Opacity
June 20, 2025
U.S. policies in a variety of areas have become less clear.
- The Trump administration is keeping the numbers on immigrant round-ups and deportations close to the vest. Business owners have become more vocal about the havoc to business operations that ICE activity is producing.
- Whether or not the U.S. assists Israel in destroying Iran’s nuclear capability has been thrown into further limbo after Trump delayed his decision for two weeks in order to give diplomacy a final try. Israel doesn’t want to wait that long, and the possibility of U.S. entering yet another Middle Eastern war is creating some rifts within the previously united MAGA movement.
- The 90-day deferment on high U.S. reciprocal tariffs runs out on July 9, less than three weeks away. This delay as dampened the initial impact of tariffs on U.S. inflation, but Fed officials are quite convinced that for at least a period of time coming soon that inflation will accelerate. Any thought of cutting interest rates is on hold pending greater clarity on this important issue, lest Fed officials make the mistake of 2021-22 and allow price expectations to also creep upward. Powell delivers semi-annual testimony to Congress on the economy and monetary policy next week.
- The Supreme Court’s term ends this month, but some key court decisions that will decide how much executive power will be enhanced will be revealed in the coming week.
- The dollar has fallen since the Trump inauguration. A weaker exchange rate fits nicely into the government’s priority of steeply reducing the U.S. trade deficit, and doubts about America’s commitment to the post-WW2 international monetary system are consequently deepening.
In overnight currency market action, the dollar fell 0.8% against the Korean won. It also slid 0.3% relative to the New Zealand dollar with that country celebrating the Matariki holiday that falls near its winter solstice. The greenback is 0.2% softer versus the euro and sterling but 0.1% firmer against the yen and Swiss franc.
The ten-year U.S. Treasury yield jumped four basis points overnight following yesterday’s closure for the Juneteenth holiday. Ten-year sovereign debt yields are also up three bps in Spain, 2 bps in the U.K. and a basis point in Germany but down 2 basis points in Japan, France and Italy.
Prices have jumped 13% for Bitcoin and 1.2% in the case of WTI oil. Alternatively, gold fell 1.2% overnight.
Share prices in Asia advanced 1.5% in South Korea and 1.3% in India and Hong Kong but fell 0.9% in Indonesia, 0.3% in Singapore and 0.2% in Japan. Stock markets in key euro area centers show gains so far of about 1%, whereas the British FTSE is just 0.4% higher. In U.S. pre-open trading, the Russell 2000 of small cap stocks has risen roughly 1%, while the major broad measures of large cap companies have barely moved.
A lot of countries reported price data this Friday.
- A 1.2% year-on-year drop in German producer prices in May represents the deepest sub-zero reading in eight months. The energy component was 6.7% lower than in May 2024, and non-energy producer price inflation of 1.3% was also less than April’s result.
- Canadian PPI inflation, which had rebounded to as high as 5.8% in January, decelerated for a fourth straight time to a 7-month low of 1.2% last month.
- Japanese core consumer price inflation, which includes energy but not fresh food, picked up in May to a 28-month high of 3.7%. The index with energy also excluded advanced to 3.3%, but total consumer price inflation edged down 0.1 percentage point to 3.5%.
- Hong Kong’s consumer price inflation of 1.9% in May was down from 2.0% in April but above 1.4% readings in both February and March.
- Moroccan CPI inflation slowed to 12-month low of just 0.4% in May from 0.7% in April and 2.6% as recently as February.
- Georgian producer price inflation of 4.9% last month was its lowest in 14 months.
- Moldovan PPI inflation printed at a 2-month low of 5.0% in May versus a 19-month high of 5.2% in April.
- A 3.1% year-on-year drop of Portuguese producer prices in May was the most deflationary reading in 17 months and a contrast to last December’s reading of +1.6%.
- Latvia experienced a 4-month PPI inflation low in May of 0.4%, while Slovenian PPI inflation matched April’s 2-month low of 1.0%.
- South Korean PPI inflation of only 0.3% in May was a half percentage point below April’s reading and its lowest in 22 months.
The French INSEE statistical agency reported June business confidence data today, showing a 2-month overall high reading of 96.1, which was characterized as “stable” although such as been below the long-term average of 100 since March 2024. Retail and services registered 3- and 2-month highs of 98.6 and 95.6, while construction (100.0) straddled its long-term mean. Manufacturing, however, edged down 0.2 points to a 4-month low of 95.9. Employment (97.3) had its best reading since January.
Measures of consumer confidence in June were reported today in the U.K. (a 6-month high), Turkey (a 3-month high), Denmark (a 4-month high), Belgium (a 4-month high), the Netherlands (a 3-month high), and Slovenia (a 2-month low).
British retail sales recorded their largest monthly decline (-2.7%) in 17 months during May and were also 1.3% lower than a year before compared to a 5.0% 12-month increase during April.
Switzerland experienced its largest current account surplus in ten quarters, CHF 19.4 billion during the first quarter of this year. That’s equivalent to about 9% of Swiss GDP, following full-year percentages of just over 5% of GDP in both 2023 and 2024.
The People’s Bank of China as was expected made no changes this month to its 1-year and 5-year loan prime rates of 3.0% and 3.5%, respectively. On-year average increases over the first five months of 2025 in Chinese industrial production of 6.3% and retail sales of 4.1% plus May’s six-month low jobless rate of 5.0% suggest enough economic strength to persuade officials to stick with the status quo. Foreign direct investment in January-May was 13.2% lower than a year earlier, but that was only half the size of a 27.1% drop in full-2024.
The U.S. Philly Fed manufacturing index in June matched May’s reading of -4. That was lower than the anticipated slight improvement and well down from 44.3 in January at the start of Trump’s presidency.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British retail sales and consumer confidence, French business confidence, Japanese CPI, Peoples Bank of China
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