August 2008 - Daily Pfennig

A free, quick-reading daily e-letter on world currencies, economic trends, and the occasional baseball score.

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  • Export Growth Drives GDP!

    * GDP grows 3.3%! * But it's a one and done for GDP! * Plenty O' data today... * A Wall Street Journal interview... ** Export Growth Drives GDP! Good day... And a Happy Friday to one and all! A Fantastico Friday in my books because it will be the end of a bad week for yours truly, and the start of a 3-day Labor Day Holiday weekend! YAHOO! Another storm, Gustav, is headed for the Gulf Coast, and maybe Louisiana, which wouldn't be good. So my thoughts are with those in the path of Gustav. Gustav is causing some problems for the price of Oil, this bubblin' crude, black gold, Texas tea, has posted its weekly gain in two months! The rise in Oil prices has lit a fire under Gold, and put pressure on the dollar once again, along with inflation pressures to say the least! The dollar pushed the euro and other currencies lower yesterday after the 2nd QTR GDP surprised on the upside, posting a gain of 3.3% annualized... I told you twice this week that 2nd QTR GDP would be stronger and yesterday, I laid out the scenario that the boost would come from: 1. stimulus checks, and 2. export growth because of the weak dollar....
  • Central bank intervention is the reason...

    * Central Bank intervention is the reason... * Busy data week... * Australia's central bank to mirror the BOE?... * China to slow appreciation ... ** Central bank intervention is the reason... Good day... I know most of you opened the Pfennig up this morning hoping to get a blast of Chuck's witty writing style. Well the airlines arranged for Chuck to stay in San Francisco a little longer, so you'll have to wait another day. The currency markets continued to get hammered by the US$ on Friday with the dollar index climbing all the way back above 76, a level we haven't seen since mid February. The dollar did sell off a bit in early European trading, but it has started to climb again as I write. Several readers sent me an excellent opinion piece by James Turk which appeared on GoldMoney's website. Mr. Turk points to central bank intervention as a major reason for the recent dollar strength. The article agrees with what I was saying last week; that the dollar has no fundamental reason to be rallying. The reports and news out of the US have not been favorable to the greenback, and the twin deficits in the US continue to soar out of control. I mentioned that the recent moves of the dollar smacked of intervention, as the dollar only wanted to move in one direction, ignoring any data which would typically send it back down. Turk points to some data which backs up this intervention theory....
  • Trade Deficit Narrows...

    * Dollar rally continues... * Be careful what you wish for! * Prime loans now in trouble... * Norges Bank to keep rates unchanged... ** Trade Deficit Narrows... Good day... And a Wonderful Wednesday to you! Tuesday saw more volatility in the currencies as the dollar went back in forth, but well within a trading range. The euro has melted down to the 1.49 area, where it seems to have found some breathing room. The Trade Deficit for June shrunk, but the Budget Deficit widened... Again, the fundamentals in the U.S. continue to point to recession. All this and more in today's Pfennig, so grab a cup o'java, a chair, and let's go! OK... Front and center this morning, I want to talk about the Trade Deficit, which in June showed a narrowing from $59.8 Billion to $56.8 Billion, which looks good, right? Well... As I told you in yesterday's Pfennig, you have to be careful what you wish for. This drop in the Trade Deficit pushed the dollar higher yesterday morning, and got me thinking... (I know, that could be dangerous, but stay with me here...) A stronger dollar will not play well, share toys, and keep its hands to itself, with exports... And exports have been something short of amazing with the dollar being weak. In fact, exports have accounted for the largest contribution to GDP in the past 5 quarters! (with U.S. Consumer spending drying up, this is possible!) Add to that, everyone getting goose bumps regarding a global slowdown... If the world slows down, like the dollar bulls are claiming they will, thus propping up the dollar, then U.S. exports will slow even more!...
  • Inflation & Jobless Rate Soars!

    * Dollar wages war on euro! * Pulling the wool over our eyes... * A Gold discussion... * 4-weeks of selling renminbi... ** Inflation & Jobless Rate Soars! Good day... And a Happy Friday to one and all! It's been 3 weeks since I last started a Friday with that note. I hit every red light this morning on my way to work, which led me to think aloud in the parking lot, that this isn't going to be a Fantastico Friday... And when I turned on the currency screens, after reaching my desk, I could see why I thought those negative thoughts... It's getting ugly... Yesterday, I was busy with my head down working on something, when Chris Gaffney yelled across the trading desk, "Hey, Chuck, what happened to the euro?" I looked up to see the euro had lost 1-cent in a matter of 20 minutes... But that's not the end... This morning, the euro has given up another 1-cent, and now trades with a 1.47 handle. Just what the heck is going on here?...
  • Retail Sales Disappoint Again...

    * Dollar rally continues... * U.S. data continues to be weak... * Gold and the A$... * Sterling melts away... ** Retail Sales Disappoint... Good day... And a Thunderin' Thursday to you! Michael Phelps didn't swim in any finals yesterday, so no Gold for the U.S! I'm just floored by this kid! My oldest son, Andrew, was a pretty good swimmer in his day, but my goodness, this kid is on a different planet! OK... Well, front and center this morning, we have a report that just printed that shows U.S. Home Foreclosures rose 55% in July. Bank seizures almost tripled according to RealtyTrac Inc. That's sad folks, simply sad... I look at this report and shake my head in disgust for Alan Greenspan. Yes, Big Al Greenspan is the root of all evil in the housing meltdown... Sure there were the greedy folks that booked loans that shouldn't have happened and all that, but down at the root of the meltdown you'll find Big Al's picture!...
  • It Was Central Bank Intervention!

    * Currencies add to their gains... * Industrial Production soars! * 2nd QTR GDP to be a one and done! * The Aden Sisters on Gold! ** It Was Central Bank Intervention! Good day... And a Tub Thumpin' Thursday to you! While I'm not out of the woods, I'm feeling more human this morning, and that's a good thing, considering where I've been earlier this week! So, I'm going to go out on a limb, and proclaim this will be a Tub Thumpin' Thursday! I've got my banana, and bottle of Gatorade at my side, so.... Let's get to the Pfennig! Front and Center this morning I have to talk about the blip that we're going to see that happened in the 2nd QTR due to the stimulus checks. It all goes back to the stimulus checks and the first sign of this came (besides Retail Sales) yesterday in the form of Industrial Production. Remember yesterday when I told you that Industrial Production is a second tier piece of data that gets ignored by the markets, but I think it's important so I talk about it? Well... Just like last week, when I described the bratty spoiled child throwing a tantrum on the floor of the grocery store as being something you can't avoid paying attention to... The growth in Industrial Production was the same......
  • Fannie and Freddie Back In The News...

    * Strange trading days... * U.K. Retail Sales surprise.... * Norway's GDP prints strong! * A CDO lesson... ** Fannie and Freddie Back In The News... Good day... And a Tub Thumpin' Thursday to you! Don't know why... I just felt like it should be a Tub Thumpin' Thursday! I hit the wall yesterday, as I went home, and fell asleep at 3 o'clock, and didn't wake up till night time! Watched a few innings of my beloved Cardinals, wanted desperately to stay up and watch the May-Walsh beach volleyball game, but went right back to bed! So... I should be rested, eh? One would think so, but with the treatments I take, they just simply wipe me out! But... Hey! I always said that sleep was the greatest thing... I just get to enjoy more of it, right? OK... Another day of strange trading... As I signed off yesterday, the euro had given up it's previous day's gains, but found some terra firma at 1.47 and then rallied in the afternoon... If you guess right, as I have not done so this week, you can catch a great price to sell, and buy, all in the same day!...
  • A Huge Data Week...

    * Dollar rebounds... * Big Ben's imagination... * More Risk Events... * Inflation lights a fire under the loonie... ** A Huge Data Week... Good day... And a Marvelous Monday to you! A weekend that was supposed to be filled with rain, was nothing but sunshine, and beautiful days. For once, I didn't make fun of the weather people that make the forecasts! But, as always, it was too darn short! The alarm went off this morning, and for a minute I thought, "to heck with this, I'm going back to sleep!" But, then as always, I got up to start the day. Well... Recall on Friday, the currencies had rallied very strongly on Thursday, and it looked like a reversal of the month-long dollar rally could be at hand... I had this to say in Friday's Pfennig: "But today is a new day folks... And what happened yesterday is now history... The attitudes could change in a NY minute, and the dollar be back in favor. This is what I'm talking about when I say things are less secure. Wishy-Washy market sentiment leads to very volatile markets, and that's what we saw yesterday... Now, let's move on to today, and see what Bullwinkle has up his sleeve. Hey Rocky, wanna watch me pull a rabbit out of my hat?"...
  • US$ saved by oil...

    * US$ saved by oil... * US Recession? (not according to Paulson)... * New Zealand worst performer in July... * Big Mac Index says buy Asia... ** US$ saved by oil... Good day...And welcome to August. The markets had a little more movement yesterday as the US GDP report came in lower than expected, and had a hidden surprise for dollar bears (more on that later). In addition to the poor GDP numbers, Personal consumption dropped and the GDP Price Index also showed a decrease. The employment cost index was flat, and the weekly jobless claims were slightly higher than expected at 448k. More Americans filed initial unemployment claims last week than at any time in more than five years. The only positive piece of data released in the US yesterday was the volatile (and somewhat unreliable) Chicago Purchasing Managers number which showed an increase back above 50. With all the bad data, the dollar sold off rather sharply and the Euro jumped a full cent to trade over 1.57 for a short while. But the dollar bears didn't celebrate for long, as the dollar sharply reversed course as crude oil prices rode to its rescue. As I explained earlier in the week, the price of crude oil and the US$ have had a very tight relationship lately, with a correlation of .9. Just after the dollar fell due to the GDP releases, crude oil began a sharp $3 drop and saved the US$ from further losses. The price of oil has continued to slide, and is now down over 11% in the past month. This has helped prop the dollar up in spite of a number of poor economic reports here in the US....
  • Currencies Rally On Bad U.S. Data...

    * Dollar rally is stopped! * FOMC meeting minutes... * Housing data you won't see on TV! * Sweden to sell Gold... ** Currencies Rally On Bad U.S. Data... Good day... And a Wonderful Wednesday to you! I'm back. I just couldn't answer the bell yesterday morning, as the night before was simply rough on your old Pfennig writer. I'm in my last week of treatment and it has been a tough row to hoe, and I feel bad that I was not able to stiffen the back and make it through the day. But, no biggie, I've got great people here to take care of things when I'm gone... When I finally dragged myself out of bed yesterday, I saw that the dollar was taking liberties with the euro and other currencies once again. It was another game of "your economy is worse than mine", as German Business Confidence took a ride on the slippery slope down. You should have seen the "bandwagon jumpers" falling all over themselves to write about how cool it was to own the dollar. I chuckled, no big laugh as that might upset my stomach! But, their claim to be cool, was quickly squashed like a bug, when the housing numbers printed, and then later in the day, with the latest FOMC meeting minutes... More on this in a minute.......
  • Hereeeeeee's Baaaaaacccckkkkk!

    * Dollar rally continues... * Who's buying U.S. debt? * Homeowners upside down.... * U.S. data continues to be bad! ** Hereeeeeee's Baaaaaacccckkkkk! Good day... And a Terrific Tuesday to you! I'm Baaaaaaaaaccccckkkk! Well, actually, I made it to the office yesterday morning, after flying all night from San Francisco (with a stop in Dallas)... I told the crew ahead of time I didn't want to hear anything about how I looked... And they obliged, but I could see that they were giggling inside! I'm still worn out, but Hey! I got back yesterday, to find out I get to go back out on the road all next week... Geez Louise, somebody get me a private plane! HA! Well... The joke on the desk used to be that "When Chuck was gone, the currencies rallied"... That certainly wasn't the case with this past absence! I had pre-written a large part of what I was going to say in yesterday's Pfennig, before I was not able to connect, flying in a big airliner....
  • Leading Indicators Fall!

    * Euro rebounds! * Forecasting a severe recession... * Commodities rebound! * Canadian inflation problems... ** Leading Indicators Fall! Good day... And a Happy Friday to one and all! Yesterday did indeed turn into a Tub Thumpin' Thursday for the euro, so let's hope today ends up being a Fantastico Friday! Well... The game of "your economy is worse than mine" backfired on the dollar bulls yesterday, as the Leading Indicators printed an awful number. I said yesterday that it was too bad that the markets normally ignored this data... But they didn't yesterday, as the number was so bad, they couldn't ignore it... Sort of like that spoiled rotten bratty kid throwing themselves to the floor of the grocery store, and throwing a temper tantrum because you said they couldn't have a candy bar! If you're next in line to check out at the grocery store, and you want to ignore the child, but you just can't because it's so obnoxious! Well, that's how it was with Leading Indicators yesterday... Here's the skinny......
  • A Downward Revision of Eurozone Growth...

    * Euro rally ends quickly! * Housing Data continues to be bad... * OECD wants Norway's rates increased... * The Aden Sisters on a Wednesday! ** A Downward Revision of Eurozone Growth... Good day... And a Wonderful Wednesday to you! I'm sitting here wondering what to write about this morning, and on the radio is a classic song by Led Zeppelin, Dazed and Confused... Seems quite apropos, eh? I say this because that's what I've been for the last month, as the dollar got up from its death bed, and there's not a sign of any medicine that was prescribed had been taken! Oh well, why would I think that things would change for me at this stage of my life, I've been dazed and confused for a long time! HA! I'm sure that's what a lot of people are saying right now anyway... The euro rebounded over 1-cent yesterday, but that rebound has been wiped out completely in the overnight markets... There's just no lasting power in any currency rally VS the dollar right now. And as I keep going saying, this is reminding me so much of 2005 when the dollar covered up its pimples and posed for GQ, only to see the pimples pop through the makeup by year-end....
  • Dollar swings a mighty hammer...

    * Dollar swings a mighty hammer... * FOMC expected to sound more hawkish... * Euro Opportunity currencies rally... * RAB leaves rates unchanged, but AUD$ falls... ** Dollar swings a mighty hammer... Good day...The dollar rallied again yesterday, and shot up even more overnight as the markets prepare for the rate announcement from the Fed. Falling oil prices helped propel the greenback higher, as oil fell below $120 a barrel for the first time since May. This latest move puts the dollar index close to 74, the point at which the last dollar correction ended back in mid June. The technical guys are all waiting to see if the index can break through 74.31, a sign that further strength is possible. But I don't pretend to be a technical analyst and would much rather look at the economic fundamentals to figure the direction of the dollar....
  • ECB to change dollar's direction?...

    * ECB to change dollar's direction?... * BOE leaves rates unchanged... * The worst is not over in US housing... * Japan's government signals expansion is over.. ** ECB to change dollar's direction?... Good day...The dollar continued its assault on the world's currencies yesterday as the dollar index moved above the 74 handle. I pulled a chart off the Bloomberg on my way out the door last night, and it showed the only major currency which was up vs. the US$ yesterday was the Swedish krona, which managed a .07% increase. This dollar rally has legs, but I still question the fundamentals behind the dollars surge. Today may be the day we see the dollar finally make a turn, as the ECB will be announcing their rate decision. It is not that I expect Trichet to raise rates, but I do expect him to sound hawkish and refocus the markets attention on Eurozone inflation and away from worries about growth. Two reports out of Germany this morning will bolster Trichet's hawkish stance. German exports rose more than economists expected in June, defying a stronger euro and pushing the trade surplus to a record. Exports increased 4.2% from may, the most since September 2006. German industrial production also increased for the first time in four months with output rising 1.7% from a year earlier. The IMF last month rose its forecast for German economic growth this year and said the global slowdown linked to the US financial crisis was less severe than it expected....

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