March 1, 2017
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United States (US) Public construction fell sharply in January while private residential construction continued to grow, climbing at a 12% annualized rate in the last three months. Non-residential continued to rebound and has now grown 8% annualized in the last three months. Public construction remains a drag on total construction, falling 5% in January and 24% annualized in the last three months. Overall, construction spending is now 3.2% above its year ago levels. With growth for all of 2016 revised higher to 5.2% after 8.7% in 2015, the trend remains towards deceleration in construction growth. On another note, Mortgage applications showed their sensitivity to mortgage rates last week as applications for both purchases and refinancing rose more than 5% as the 30-year fixed-rate mortgage rate hit 4.30%, the lowest level since December. Lastly, Personal income and disposable income rose modestly in January. Real consumer spending slowed slightly in January, increasing by 0.1% annualized, a lower rate than in the previous quarter, indicating consumers started 1Q17 spending cautiously, despite strong consumer confidence surveys. Core PCE, the Fed's preferred inflation metric, rose in January 0.3% and is 1.7% above its year ago levels.
Australia’s dollar traded at 76.77 U.S. cents at 11:22 am PST and New Zealand dollar traded at 71.49 U.S. cents. Australia's fourth-quarter gross domestic product rose at a 2.4% annual pace, beating an expected gain of 1.9%. Reuters said Australia's economy rebounded sharply in the fourth quarter as exports boomed while consumers and government lifted spending, extending the resource rich nation's 25-year streak without a recession. For the fourth quarter, GDP rose 1.1%, compared to an 0.7% increase seen.
Euro traded at 1.0555 against USD at 11:22 am PST. Germany's inflation accelerated more-than-expected in February to its highest level since the middle of 2012. The flash consumer price index inflation rose to 2.2% from 1.9% in January. Economists had forecast 2.1% inflation. The latest inflation figure was the highest since August 2012, when it was the same. A higher figure of 2.4% was seen in November 2011. Energy inflation surged to 7.2% from 5.9%. Food inflation accelerated to 4.4% from 3.2%. Compared to the previous month, the CPI rose 0.6% in February, in line with economists' expectations. The harmonized index of consumer prices, or HICP, rose 2.2% year-on-year in February, which was also the highest since August 2012. In January, the HICP inflation was 1.9%. On a month-on-month basis, the HICP increased 0.7% in February, while economists had forecast 0.6% rise.
British Pound exchange rate is 1.2304 against USD at 11:22 am PST. The manufacturing sector activity in the UK economy showed a bigger-than expected drop and slowed its pace of expansion sharply in February. The final Purchasing Managers' Index (PMI) in the UK arrived at 54.6 points in Feb, as compared to a previous 55.7 reading. Markets had predicted a drop to 55.6.
Japanese Yen traded at 113.68 per USD at 11:22 am PST. The Nikkei Japan Manufacturing Purchasing Managers' Index, or PMI, continued to expand in February to 53.3 from January's 52.7, marking the highest reading since March 2014. Japan's manufacturing upturn gained further momentum in February after a broad-based uptick in new orders encouraged firms to raise both output and hiring.
Canadian dollar traded at 1.3347 per USD at 11:22 am PST. The Bank of Canada has held rates again at 0.50%, as virtually everyone had expected. "Overall, recent data on the global and Canadian economics have been consistent with the Bank's projection of improving growth," the bank wrote in a short accompanying policy statement. "In Canada, recent consumption and housing indicators suggest growth in the fourth quarter of 2016 may have been slightly stronger than expected," it added. "While there have been recent gains in employment, subdued growth in wages and hours worked continue to reflect persistent economic slack in Canada, in contrast to the United States." Notably, the Bank of Canada also held rates the last time around, which was two days before the inauguration of US President Donald Trump.
Onshore Chinese yuan traded at 6.8794 per USD at 11:23 am PST and offshore Chinese yuan traded at 6.8654 per USD. The Chinese economy accelerated at a steady pace in February, with manufacturing conditions improving and services activity holding steady, both signs of a firmer domestic recovery. Beijing’s official manufacturing purchasing managers’ index (PMI) rose to 51.6 in February from 51.3 the previous month, on a scale where readings above 50 signify expansion. Analysts in a median estimate called for a slight decline to 51.2. China’s official manufacturing PMI monitors business activity at large and state-run factories, contrasting with a private report from Caixin that looks at small- and medium-sized enterprises. Caixin China will produce its own manufacturing PMI later in the day.
This market update is prepared by Cathay Bank for informational purposes only and does not constitute any form of legal, tax or investment advice, nor should it be considered an assurance or guarantee of future exchange rate movements or trends. This information is provided without regard to the specific objectives, financial situations or needs of any recipient. Cathay Bank does not make any representations or warranties about the accuracy, completeness or adequacy of this market update.