Greenback Finds A Little Traction

The US dollar is better bid today but remains largely in the ranges seen in recent days.  There a few developments to note, which together are lifting European equities after Asian equities softened.  

First, the API oil inventory estimate showed an unexpected fall of 4.3 mln barrels.  An increase of half the magnitude was expected.  The DOE estimate, which is considered more reliable, will be one of the North American highlights today. 

Second, and also supporting the oil complex today was the “good cop bad cop” routine by Kuwait.  Earlier Saudi Arabia had confirmed that the freeze in output required Iranian participation, which is widely understood as unrealistic until it boosts output toward pre-sanction levels.  Oil priced nose-dived, and today Kuwait plays down Iranian participation.  Prices supported, and the energy sector is helping European equities move higher. 

The other set of developments which have also been supportive are the economic reports from China and Germany.  China’s Caixin PMI for services edged higher to 52.2 from 52.1.  This, coupled with the previously released manufacturing survey, lifted the composite to 51.3, its highest level in a year.  And as if to drive home the message, Fitch again opined that a hard landing in the world’s second-largest economy was unlikely.  

Germany, the world’s fourth largest economy, reported a smaller than expected fall in industrial output.  The 0.5% decline was less than half of what was expected following yesterday’s news of a 1.2% decline in factory orders.  The breakdown was not particularly favorable, but the fact that overall output was a better than expected seemed to satisfy, especially in that it follows the heady 2.3% increase in January.  It suggests that Q1 German GDP is on pace to match if not surpass the Q4 15 pace.  

However, for the record, the 1.3% rise in construction is seen as mostly weather-related.  The 1.8% decline in energy shows that economy is still adjusting to the dramatic drop in prices.  Investment goods, which is a key export, rose 1% while consumer goods output fell 1%.