The New Year’s Opening Act – Currency Thoughts
The New Year’s Opening Act
January 2, 2025
Year 2025 in America kicked off with a terrorist act in the deep south city of New Orleans and news of a second straight double-digit decline in U.S. mortgage applications, yet pre-open stock futures point to a rebound from last week’s decline. The dollar also made gains, touching its strongest weighted level in 25 months. The greenback climbed overnight by 0.7% against sterling, 0.3% relative to the euro and 0.2% versus the Canadian dollar but is somewhat lower relative to the yen, peso, won and Aussie dollar.
Most, but not all, countries reopened for business. Notable exceptions are Switzerland where 14 of 26 regional cantons are observing the ancient alemannic tradition of Berchtold Day and both Japan and New Zealand where most banks and schools remain shut for New Years Day.
December manufacturing purchasing managers surveys have been published for a slew of economies.
Ten-year sovereign debt yields have slipped back five basis points in Germany, Spain and France and four bps in Italy, Great Britain and the United States.
The price of oil jumped 1.5%, and gold is 0.6% firmer. Bitcoin, on the other hand, declined 2.4% on this first business day of 2025.
Stock markets abroad have behaved divergently, slumping 2.7% in China, 2.2% in Hong Kong, 0.9% in Taiwan, and falling so far by 0.6% in France and 0.5% in Italy and Spain. Alternatively, the Indian Sensex advanced 1.8%, and share prices rose 1.2% in Indonesia, 0.5% in Australia. and 0.4% so far in the U.K..
Consumer price inflation in December printed marginally above the prior month’s 40-month low of 1.55% in Indonesia. Cypriot CPI inflation accelerated 1.1 percentage points to a 6-month high of 2.6% but slowed to an 80-month low of 4.1% in Pakistan. The prior cyclical peaks in those economies had been at 5.95% in Indonesia, 10.9% in Cyprus, and 38.0% in Pakistan.
Peruvian CPI inflation, which crested at 8.8% in mid-2022, slowed to a 3-month low of 1.97% in December from 2.27% in November. A 43-month low of 1.78% was touched in May 2024.
The British Nationwide house price index rose 0.7% last month, and its 12-month 4.7% rate of increase was the most in 26 months.
With the 30-year fixed mortgage rate climbing to a 7-month high, U.S. mortgage applications fell 12.6% last week on top of a 10.7% prior week decrease.
Euroland’s manufacturing purchasing managers index in December got revised 0.1 point lower to a 3-month low of 45.1. The report included a 14-month low in the production sub-index, a faster contraction of demand, and declining employment. One bright spot was Spain’s 2-month high PMI of 53.3, and another was a 4-month high in confidence about the future. However, very depressed readings of 41.9 in France, 42.5 in Germany, and 46.2 in Italy point to Euroland’s continuing manufacturing recession for the period ahead.
December’s British factory PMI reading was also revised downward to a an 11-month low of 47.0, well below the 50 level that divides positive from negative growth on these diffusion indices and also 5.5 points under the 2024 high in August.
Among reporting East European economies, manufacturing PMI readings in December printed at a 7-month high of 50.0 in Hungary, a 4-month low of 48.2 in Poland and a 5-month low of 44.8 in December.
In Nordic Europe, the manufacturing PMIs of Norway and Sweden fell to a 6-month low of 48.6 and a 3-month low of 52.4.
Turkey‘s PMI stayed below 50 in December, printing at 49.1, which was closer to the year’s high of 50.1 last February than to September’s multiyear low of 44.3.
The Absa-compiled South African PMI tumbled 4.5 points in December to a 3-month low of 48.1 versus a 2024 high of 54.0 hit last April.
Brazil’s PMI in December matched August’s 8-month low of 50.4 and represented the fourth consecutive month in which factory conditions improved at a slowing pace.
As in Euroland and the U.K., manufacturing PMI scores in India and Australia were revised downward. In the later, the revision was by 0.4 points to 47.8, representing a 2-month low. India’s revision size was a full point and left the new estimate at a 1-year low of 56.4, still connoting a solid pace of expansion.
Manufacturing PMI readings last month among other Asian economies rose to a 32-month high of 54.3 in the Philippines, a 7-month high of 51.2 in Indonesia, a 4-month high in Thailand of 51.4, and a 5-month high of 52.7 in Taiwan. Alternatively, readings fell to a 2-month low of 49.0 in South Korea, a 3-month low of 49.8 in Vietnam, and a 9-month low of 48.6 in Malaysia.
Four interest rate cuts totaling 125 basis points by the European Central Bank since last June have helped to revive depressed money growth in the European joint currency bloc. M3 money grew 3.8% on year in November, the most in two years, and the year-on-year 3.5% average gain in September-November was a full percentage point above that in June-August. Credit growth has hardly responded however. Bank lending to households and non-financial firms posted on-year rises in November of just 0.9% and 1.0%.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Euroland money and credit growth, manufacturing purchasing manager surveys
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