The dollar is currently gaining ground against the Japanese Yen on Friday, but is nearly unchanged in comparison to its major European competitors. There were several important pieces of economic data released at the end of the trading week, including a stronger than expected increase in consumer sentiment and a surge in the New York manufacturing data. However, U.S. industrial production unexpectedly declined.
Conditions for New York manufacturers improved for the first time since the summer in the month of February, according to a report released by the Federal Reserve Bank of New York on Friday, with the index of regional manufacturing activity unexpectedly turning positive.
The New York Fed said its general business conditions index jumped to a positive 10.0 in February from a negative 7.8 in January, with a positive reading indicating an increase in regional manufacturing activity. Economists had expected the index to climb to a negative 1.8.
With decreases in manufacturing and mining output more than offsetting a substantial rebound by utilities output, the Federal Reserve released a report on Friday showing that U.S. industrial production unexpectedly decreased in the month of January.
The report said industrial production edged down by 0.1 percent in January following a revised 0.4 percent increase in December. Economists had expected production to increase by 0.3 percent, matching the growth originally reported for the previous month.
Consumer sentiment in the U.S. has improved by more than anticipated in the month of February, according to a report released by Thomson Reuters and the University of Michigan on Friday. The report said the preliminary reading on the consumer sentiment index came in at 76.3 in February compared to January’s final reading of 73.8.
Economists had been expecting the consumer sentiment index to show a somewhat more modest increase to a reading of 75.0.
The Bank of Japan said that the economy is likely to end further downturn and exports and industrial production will start picking up gradually in the months ahead, according to a monthly report from the central bank.
“Japan’s economy appears to stop weakening,” the central bank said in the report, upgrading its previous assessment that the economy “remains relatively weak.”
Today’s report noted that exports continued to decrease, but the pace of decrease has moderated. At the same time, industrial production appeared to stop decreasing, the banks said.
The dollar dipped to a low of Y92.215 against the Yen on Friday, but has since risen to around Y93.620.
Japan’s industrial production grew 2.4 percent month-on-month in December, down from the 2.5 percent increase initially estimated, final data from the Ministry of Economy, Trade and Industry showed Friday.
The Eurozone economy is likely to stop shrinking further in the first quarter after recording a faster contraction in the fourth quarter, IHS Global Insight Chief European and UK Economist Howard Archer said Friday.
IHS Global Insight noted that fourth quarter’s deeper-than-expected contraction is unlikely to prompt the European Central Bank (ECB) to lower interest rates, at least in the near term, as it clearly believes that Eurozone’s economic activity has passed its low point and the major downside risks have been diluted, even if activity is currently still muted and recovery prospects limited.
However, a further marked appreciation of the euro could eventually prompt the bank to cut interest rates to try and reduce the upward pressure on the single currency, but the euro is not yet at a strong enough level to warrant such action.
The buck climbed to around $1.3305 against the Euro on Friday, but has since pulled back to around $1.3360, nearly unchanged for the day.
Eurozone’s trade surplus declined in December from a month earlier, the latest figures published by Eurostat revealed Friday. The surplus fell to EUR 11.7 billion in December from a revised EUR 13 billion in the previous month. Economists expected the surplus to fall to EUR 13.1 billion from November’s originally estimated EUR 13.7 billion.
Employment in Germany’s manufacturing sector increased from last year in December, preliminary data released by the Federal Statistical Office showed Friday. The number of employees working in manufacturing units with 50 or more employees increased 1.4 percent from a year earlier to around 5.2 million in December.
U.K. lawmakers on Friday said the Treasury could not explain the effect of the quantitative easing on the whole economy. The panel said some GBP 375 billion has so far been injected into the economy as an ‘experiment’.
“The Treasury has not convinced us it understands either the risks it has taken on by indemnifying the Bank of England against losses on Quantitative Easing or the expected economic benefits,” the Public Accounts Committee said in an annual report.
Further, lawmakers said, “The Treasury’s attempts to stimulate economic growth through new lending have, so far, not been successful.” The treasury should be clear what it wants this BoE scheme to achieve and how it intends to monitor it.
The greenback climbed to around $1.5460 against the pound sterling Friday, but has since eased back to around $1.5525.
Denting recovery hopes, U.K. retail sales fell unexpectedly in January as heavy snow fall battered food turnover, official data from the Office for National Statistics showed Friday. Confounding expectations for a 0.5 percent rise, retail sales including auto fuel dropped 0.6 percent in January from the previous month, when sales fell 0.3 percent.
Confidence among British households regarding the value of their homes turned significantly less downbeat in February, and the corresponding index climbed to the highest level in thirty-one months in February, data from a survey by Knight Frank and Markit Economics showed Friday. The house price sentiment index increased to 48.4 in February from 47.6 in January, hitting the highest level since June 2010.