March 2009 - Daily Pfennig

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

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  • A Horrific Jobs Report!

    * 651K jobs lost in Feb... * Dec. and Jan Job losses revised up... * Talking Norway, Canada, Australia... * Brazil stealthlike for 3 months... ** A Horrific Jobs Report! Good day... And a Marvelous Monday to you! A wonderful weekend here in St. Louis, a taste of spring was in the air. I got to spend some time with some of my closest friends on Friday night, a good time was had by all! Well... Our Fantastico Friday was interrupted by that horrific Jobs Jamboree number that printed Friday morning... 651K jobs were lost in February, which let me remind you is a couple of days shorter than other months. So, it could have been worse! Hard to believe that could be the case, but it's true. The unemployment rate rose to 8.1%, from 7.6% in January. The jobless rate is the highest since 1983. The economy has now shed 4.4 million jobs since the recession began in December 2007, with almost half of those losses occurring in the last three months alone....
  • Up, up, and away...

    In This Issue..

    * TALF...
    * Dollar falls even more...
    * Commodities...
    * Still disappointing...

    And Now... Today's Pfennig!

    Good day...And a Fantastic Friday to you! It's the end of another week that not only brought us the beginning of spring but also a major shift in the currency market. The effect from the Fed's decisions on Wednesday carried over into yesterday's trading session with the dollar engaged in another large sell off. How long and how far would be the big question marks right now but until another major event comes along, the dollar should continue to get sold.

    As I just touched on, the dollar was still down and out suffering from a two day hangover yesterday as a result of the quantitative easing measures the Fed has decided to pursue. We also gained some insight into the TALF that I mentioned yesterday which is intended to resurrect both consumer and business lending. They will expand to accept securities backed by four types of loans that include leases of business equipment and rental car fleets, securities backed by loans extended by mortgage servicers to cover missed payments by homeowners, and securities for floorplan loans. The Fed also said that this announcement was a first step in expanding the TALF and that a number of other asset classes are under review....
  • Geithner tanks the dollar, but then pushes it back up...

    In This Issue..

    * Geithner sends the dollar on a thrill ride...
    * A failed UK gilt auction...
    * China set to recover first...
    * AUD and NZD rally again...

    Good day... The currency markets took back what little strength the dollar mustered over the past two days with the Euro moving back above popping back above 1.36 and the Australian dollar moving back up over .70. The cause for this dollar weakness? Data released in the US yesterday was surprisingly strong again, so investors dumped the 'safe haven' holdings of Treasuries and moved money back into higher yielding investments.

    At one point yesterday the dollar index dropped precipitously (more than 1.5% in less than 10 minutes), and then bounced back up within a half hour. Jennifer McLean, who takes care of our currency trading while Chuck is away from the desk, said the sudden moves were due to Treasury Secretary Geithner's comments. Apparently Geithner was asked about China's call for a new international reserve currency yesterday at a NY event. He said that while he hadn't read the proposal, he understood it as a plan 'designed to increase the use of the IMF's special drawing rights. And we're actually quite open to that.' After hearing those words, currency traders immediately starting selling off the dollar. After all, if the Treasury Secretary of the US says the administration is open to a new international reserve currency, why do you want to hold dollars? I guess Geithner got wind of what he had done to the currency markets pretty quickly (the power of Blackberries!) and 15 minutes later he clarified his comments to say the US dollar should remain as the world's reserve currency....
  • A change in the Trading Theme?

    * A change in the Trading Theme? * Gold rebounds Big time! * ECB cuts 50 BPS, as expected... * Lots of lessons today... ** Jobs Jamboree Friday! Good day... And a Happy Friday to one and all! It supposed to be 70 degrees here today, so in my book that makes it a Fantastico Friday! It's also a Jobs Jamboree Friday, and while this report is probably not going to be anything good, it will be Fantastico BAD! The experts have forecast a job loss in February to be 650K!!!!!! Six Hundred and Fifty Thousand did I say? Yes, sir, may I have another, sir? Well, shiver me timbers, this is just downright awful! And if it prints this bad, it will be the most jobs lost in a month since 1949! This is horrific, just plain horrific folks... And in my opinion, will NOT signal the bottom of the barrel for labor just yet... This thing has momentum and I don't think you'd want to step in front of this run-away bus!...
  • On the turning?

    * SNB surprise... * Currencies continue... * Retail Sales... * Recipe for inflation... And Now... Today's Pfennig! On the turning? Good day...And a Fantastic Friday to you. It would be nice to have some of that warm weather they have in Jacksonville make its way north, but hopefully its right around the corner...patience. Yesterday was a wild ride so hopefully you had that seat belt fastened tight and both hands on the wheel. I have a lot to talk about so I'll get right to it... We were greeted yesterday morning with some big news out of Switzerland where they not only cut rates to .25% from .50% but also decided to take matters into their own hands. Chuck sent me some thoughts before he left for vacation, so here you go. 'The Swiss National Bank (SNB) intervened in the markets yesterday with a bang! The SNB sold francs for euros and dollars to further reduce the price of money (since they've already cut interest rates to the bone). Francs went from 86-cents to 84-cents in one day! UGH!'...
  • UK data boosts the dollar...

    In This Issue..

    * UK data boosts the dollar...
    * US GDP falls further...
    * Norway cuts rates...
    * Big wins by MIZZOU and BLUES...

    Good day... I want to start this mornings Pfennig with a big congratulations to the MIZZOU Tigers who pulled off what most believed was an unlikely win over Memphis last night. What a game! They move on to the Elite Eight to play powerhouse UCONN on Saturday.

    The currency markets weren't as exciting as the basketball games yesterday, as the dollar held in a fairly tight range. The big move came in early morning trading as a report was released in the UK showing their economy's contraction was worse than previously thought. This news was GDP in the UK fell 1.6% in the 4th quarter of 2008 vs. the previous quarter. And the outlook presented by the Bank of England is not rosy. BOE Chief Economist Spencer Dale said this morning that the British economy's short term prospects are 'bleak'. Chuck has brought up the comparison between the UK and US economies several times, as the UK economy looks like mirror image (albeit smaller) of the US. The UK economy has been slightly ahead of the US in the race toward economic meltdown. Unfortunately the US Fed seems to be shadowing every move by the UK, cutting rates to near zero and then using 'quantitative easing' to force them down even further....
  • A Day Of Healing...

    * Currencies have a mini-rally... * Only to see profit taking overnight... * Gold rebounds too! * Retail Sales on board today... ** A Day Of Healing... Good day... And a Thunderin' Thursday to you! It was a Tub Thumpin' Wednesday yesterday for the currencies and Gold, after seeing them back off earlier this week! I'm in Jacksonville for a company event, and then on Friday morning, I head south to start my spring vacation! But first, some work to do here, and then on to the south! It was 29 degrees when I got in the car to leave for the airport yesterday morning... And it was 77 degrees when I finally arrived in Jacksonville! YAHOO! But even as loud as I can say YAHOO for the warm weather, which I've said over and over again, I've got to go where it's warm, it wasn't as loud as a the YAHOO yelped by currency owners as the euro led the currencies higher and higher all day long!...
  • Bad news for GM and Chrysler rallies the US$...

    In This Issue..

    * Bad news for car makers rallies the US$...
    * Yen comes back strong...
    * Singapore to devalue?...
    * German Chancellor Merkel gives warning...

    Good day... And good Monday morning to all of you. I can't believe March is nearly over, it seems as though it just started. March will end up being a pretty good month for the currency markets, as investors exited the safety of US treasuries and started moving funds back into higher yielding assets. But the markets continue to be volatile, and news released on Friday and over the weekend has sent these investors rushing back to the safe haven of the US dollar.

    The Japanese Yen and US dollar benefited after a US Government official said Friday that bankruptcy may be the best option for GM and Chrysler. The dollar continued to gain strength this morning after US Treasury Secretary Geithner warned yesterday that some financial institutions will need 'large amounts' of aid. When the Treasury Secretary says large amounts, you know it is going to be billions or trillions! Geithner was making the rounds of Sunday morning talk shows to try and justify the money already spent and prepare the taxpayers for another request of funds....
  • The Treasury Secretary rides to the rescue...

    In This Issue..

    * Geithner rescues the stock market...
    * Commercial real estate, the next big drag...
    * Norway: the new safe haven...
    * China pushes for a new reserve currency...

    It was a dramatic day on Wall Street yesterday, with the major stock indexes surging as much as 6 percent, including the Dow Jones which jumped more than 400 points. The reason for all of this euphoria on Wall Street? A combination of Geithner's plan to rescue the banks from the toxic debt in which many are mired, and a surprisingly large uptick in existing home sales. I touched briefly on the Giethner plan in yesterday's Pfennig and readers know I am more than a little skeptical about its possible success.

    But the housing numbers really caught me off guard. Existing home sales jumped a tremendous 5.1% in February, clearly above all expectations. But Chuck pointed out that the almost 1/2 of the sales were either foreclosures or short sales, hardly what you would call a 'rebound' in home sales! And these additional existing home sales came at deep discounts. The median price for an existing home fell 15.5% in February 2009 to $165,400 as compared to $195,800 in February of 2008....
  • A building block...

    * A quiet Friday... * Euro hits 1.30... * Chinese concern... * This week in data... ** A building block... Good day...And a Marvelous Monday to you. Its hard to believe that Monday morning is already upon us, where does the time go? Just as the currency market took a breather, our cold weather from last week decided to follow suit as it turned out to be a nice late winter weekend. Friday was fairly uneventful as the currencies traded in a tight range throughout the course of the day so it will be interesting to see how this week shapes up. Let's see if the currencies can build from last week...

    Volatility was basically non-existent during Friday trading with less than a .50% difference between the high and the low of the dollar index. The overall bias, however, was a weaker dollar and the euro held onto 1.29 for a majority of the day and was near 1.2920 as I left the desk. The pound and Swiss franc were the only two currencies left on the bench last week with losses of about 1% and 2.5% against the dollar respectively. The rest were able to turn in a decent week with the Swedish krona on top of the pile posting a 6.5% gain....
  • Saying "NO" To Eastern Europe...

    * Dollar continues to rally... * John Taylor buys dollars... * Canada sees a deficit! * More bailout funding... ** Saying "NO" To Eastern Europe... Good day... And a Marvelous Monday to you! Welcome to March too! Here and a lot of the country saw March come in like a lion, which means it should go out like a lamb, right? Let's hope it begins turning in that direction before month-end! 9 days before I leave for Florida, the countdown begins! Well... The currencies continue to trade heavy under the pressure of the dollar, and the "flight to safety" in Treasuries... The euro has lost the 1.26 handle and continues to look weaker and weaker all the time. The latest move down came as a result of new that Eurozone leaders rejected a request for Eastern Europe aid... Here's the skinny on that......
  • High yeilders continue to rally...

    In This Issue...

    * High yeilders continue to rally...
    * Quantitative easing drives the markets...
    * Inventories to drive inflation...
    * Happy Birthday Chuck...

    Good day... I'm back from a long vacation with the family down in Florida, I had a great time but it actually feels good to get back to work. But before I get started this morning, I want to compliment Mike on what a fantastic job he did on the Pfennigs while Chuck and I were in Florida. Mike jumped right in and cranked out some great information, setting the bar rather high for me. We have a busy week ahead of us, so better get right to it.

    Currency investors continued to pull out of the dollar and move funds back into higher yielding currencies on Friday. The best performing currencies on Friday were the higher yielding commodity based currencies of Australia, New Zealand, and South Africa. Investors were eager to move money back into the higher interest rates available in these currencies as markets began to stabilize. With the Feds announcement last week that it will buy $300 billion of US government bonds, deflation is now a thing of the past. This purchase by the Fed monetizes the debt, basically pumping the cash directly into the markets. It is the most inflationary action the Fed can take, Bernanke has now put the printing presses in high gear. With deflation no longer a worry, commodity currencies have begun to look attractive again....
  • ECB rate decision looms...

    In This Issue..

    * ECB rate decision looms...
    * China pushes for a bigger seat at G20...
    * Declining global reserves hurt US Treasuries...
    * Commodity currencies come back...

    Good day... The dollar held on to its gains through out most of the day yesterday, as investors continued to look for a parking place in the volatile markets. But late in the day, the sentiment changed and the dollar started getting sold vs. most of the currencies. This dollar weakness continued overnight with the Euro gaining back 1 cent to trade back above 1.33 and the commodity based currencies of Norway, New Zealand, Australia, and South Africa all gaining over 1 percent vs. the greenback.

    What caused this sharp turn around? I had to look hard to find anything which set this reversal in motion, and could only find references to the upcoming ECB rate decision due on Thursday. The euro had come under selling pressure the past few days as currency traders bet the ECB would be cutting rates by 50 basis points on Thursday. This cut would, of course, narrow the yield advantage the Euro holds over the US$ and therefore make it less attractive to investors. There were also many who believed the ECB should follow the path of the US, UK, and Japan and begin using quantitative easing to further force down rates....
  • Another day for the currencies...

    * Disappointing data...
    * Euro held ground...
    * Down under...

    Another day for the currencies...

    Good day...And a Terrific Tuesday to you. Another Monday morning has come and gone but not before confirming the US economy is still heading down the wrong side of the slippery slope. The uneventful trading day from Friday certainly didn't carry over as we saw a sizeable run up in currencies along with equities during the morning session. As the day progressed, the equity markets shed their gains but most of the currencies remained resilient and held on. I guess I'll stop beating around the bush and get right to it...

    It seems that Bernanke's calming approach during his interview with 60 Minutes gave investors the feeling that we are not as bad off saying the risk of a depression has been averted. He went on to say if the government succeeds in calming financial markets, the recession will probably end this year and the economy will expand in 2010....
  • Auction Week!

    * Currencies have a mini-rally... * Deficits do matter, eh? * Turning Japanese... * Gold fails to respond... ** Auction Week! Good day... And a Terrific Tuesday to you! Sometimes I'm right, and I can be wrong, my own beliefs are in a song... I just heard that great old song on the radio, and thought, that's a great credo to live by... Oh, well... That's just me I guess... Let's go to work! The currencies, led by the euro, made a valiant effort during the trading day in the U.S. yesterday to mount a rally, and they did! They have gained even more ground in the overnight markets, with the euro trading with a 1.27 handle... OK, I hear you saying... But, Chuck, tell us what pushed the currencies higher yesterday? Ahhh... Grasshopper... Of course I'll tell you that! Let me first set the table with the background story, then lead into the real meat with a building crescendo!...

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