German ZEW Underpins The Euro...
Daily Pfennig

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In This Issue..

* Currencies rally on tariff news...               
* Norway's election doesn't move krone...            
* Canada's Gov't problems to hurt loonies?                                 
* 1-year since Lehman Bros...                                                                           

And Now... Today's Pfennig!

German ZEW Underpins The Euro...                           

Good day... And a Terrific Tuesday to you! Well, just as I suspected yesterday in the Pfennig, when the U.S. traders came in and got word of the new Chinese tariffs on tires, the dollar got sold like re-mastered box sets of Beatles albums! So, we've got that to talk about, and some other items I'd like to discuss... So, here we come Terrific Tuesday!

OK... Well, just as I stated above, the U.S. traders didn't care for the new tariff, feeling that it would project a trade war, and therefore sold the dollar. The Big Dog, euro, traded to 1.4635 by mid-day... There was some profit taking late in the day, which brought the euro back to below 1.46, but then this morning, the euro got another boost from a report on German Investor Confidence, to bring it back to 1.46, as I write...

German Investor Confidence, as measured by the think tank ZEW, rose to the highest level in nearly three years this month... ZEW believes that their index predicts developments 6 months ahead... So... If that's true, then the German economy will be well on its way to a strong recovery!

So... Traders backed up the truck and bought euros this morning... I look at 1.46 like the deal we went through when the euro was 1.43... It went back and forth from 1.4150 to 1.43 for a couple of weeks, before finally breaking out to 1.45, and then 1.46... With the single unit going back and forth over and under the 1.46 figure, it's quite similar. And these are good things for buyers!

It allows buyers to buy on dips, before the assets finally breaks out... I sure hope you all are paying attention here... Sorry, don't mean to lecture... But that was an important point!

AT one point yesterday all the little dogs (non-euro currencies) were off the porch, and chasing the dollar down the street. But overnight, we've seen some news in parts of the world that haven't been of the "pro-currency" nature!

One piece of which I am talking about, is in Australia, where the Reserve Bank of Australia (RBA) issued a communiqué' stressing that it (The RBA) was seeking to avoid "premature tightening" monetary policy... Hmmm... You can look at this two ways... You can say that the RBA is just trying to get everyone to calm down, and prepare them to wait longer for rate hikes... OR... You can say that the RBA is trying to throw the dogs off the scent of a rate hike, so things don't get too heated before they actually do the deed.

I'm going to pin my colors to the mast of the second thought... I think the first rate hike is still in the cards for the 4th QTR of this year, and not 1st QTR of next year...

Unfortunately, the market participants in Aussie dollars (A$) didn't take it that way, and decided that they had run up the A$ too far, too fast... But just like we saw with Brazil, and Canada, when the "fickle traders" sold when they got scared, the A$ should come back from this, and I would look to use this as a buying the currency cheaper opportunity...

The President was out to drum up enthusiasm for the economy yesterday... He said that job losses were ending... However, I guess he didn't get the memo from Eli Lilly, that they will be laying off 5,500 jobs in the next 2 years... So... They're not ending... They're just not the same number of people working these days to lay off! So, I guess if you start out with let's say 5 million people working, and 4 million of them get laid off, then you've only got 1 million more to lay off, that's less than 4 million, and therefore the layoffs end...

OK, let's not go down that road this morning...

I've got something that is quite interesting to discuss this morning... OK, did you hear about Germany issuing "dollar denominated bonds"? What's up with that? I hear you asking... Well... There are a number of schools of thought here, but I think what we have here is a green light from Big Ben Bernanke to other countries to carry the flag of dollar destruction, that the Fed has carried since 1913...

Now, those that pay attention in class, might be saying, but Chuck! If Germany per se is issuing dollar denominated bonds, wouldn't that be good for the dollar, as dollars have to be bought by the Germans... Ahhh... But maybe, dollars don't have to be bought... Maybe dollars are already in reserves? Lots of dollars in the reserves of Central Banks all over the world!

OK, here are the scary things about this to me... 1. further dissolution of the dollar's value, 2. alternative bonds to buy other than Treasuries! 3. The dollar becomes de factor the new funding currency for the Carry Trade

When I think of all the reasons to NOT own the dollar, I'm reminded of a great song... All in all it's just another brick in the wall! With the "it's" being the reasons to NOT own the dollar!

Whew! My fingers feel like they had to type a marathon! HA!

OK... Like that one? I've got another one in my back pocket to talk to you about, but I think I'll hold it for tomorrow's Pfennig...

I received an email from a reader that explained how auto tires are made, and how the U.S. has had to import rubber for these tires from Brazil, China and Europe any way! So, tire makers won't be home free with the tariff that the President slapped on the Chinese...

I did see an article that hangs with my thought yesterday that these tariffs are "no good" for the global recovery... Nice to see others that see things like I do... I don't like being out on the limb, albeit a nice strong fat one, by myself all the time!

The Norwegian krone is trading about in at the same level as yesterday morning, which is a good thing, considering that Norway had an election that totally slipped by my radar, yesterday... There was no real change to the center-left government, but there were some thoughts yesterday that a change could take place... You have to like the krone going forward based on the government basically remaining the same, with the same monetary policies, etc. that have guided Norway's economy and banks through the stormy waters that have existed the last 2 years!

British pound sterling is weaker this morning as Bank of England Gov. King, brought to light 3 areas of concern in the U.K. economy... I've never bought into the sterling strength, so maybe this corrects some of this overbought currency.

And the Japanese yen gave up some of its recently gained ground VS the dollar overnight... The new Gov't in Japan, issued a report that calls for an increased participation in the intervention market to keep yen from getting too strong... Great! That's just what we need... NOT! The Bank of Japan already had their hands in the intervention cookie jar enough! Now, the new Gov't is calling for more participation?

I think the Canadian dollar / loonie might see some weakness in the near term, due to a development in the Parliament... The coalition Gov't that exists in Canada, is being threatened. The Liberal party, has withdrawn its support for the Conservative party vowing to bring them down... Whenever you have questions like this in Government or leadership, the currency will suffer...

Did you see that the judge residing over the Bank of America (BOA) settlement with the SEC rejected the fine of $33 million, that BOA and the SEC had agreed on? The Wall Street Journal reported yesterday that: Federal district Judge Jed S. Rakoff rejected a proposed $33 million settlement of allegations by the Securities and Exchange Commission that Bank of America "materially lied" in shareholder communications about bonuses to employees of Merrill Lynch.

The Data Cupboard gets restocked today with Retail Sales for August. I talked about this yesterday, and nothing has changed, so expect Retail Sales to have been strong in August on the Cash for Clunkers program, and back to school purchasing... And we'll see the stupid PPI for August... PPI is wholesale inflation, and is at least a bit better than the manipulated CPI version, which we'll be so lucky to see tomorrow!

Today, marks the 1-year anniversary of the Lehman Bros. collapse... What have we learned from that meltdown? Not a darn thing! We're still spending like there's no tomorrow, and we're still willing to bail out some and not others... In the past year though, Gold is up 30%... That says it all to me!

So... To recap today, ZEW says German Investor Confidence is strong, and that has helped to underpin the euro. Aussie dollars got sold after the RBA tried to calm the markets down regarding the timing of a rate hike, and Retail Sales headlines the data releases today.

Currencies today 9/15/09: A$ .8580, kiwi .70, C$ .92, euro 1.46, sterling 1.6475, Swiss .9630, rand 7.4150, krone 5.92, SEK 7.0150, forint 186.50, zloty 2.8550, koruna 17.38, RUB 30.88, yen 91.20, sing 1.4230, HKD 7.75, INR 48.65, China 6.8289, pesos 13.32, BRL 1.8125, dollar index 76.85, Oil $69.18, 10-year 3.41%, Silver $16.52, and Gold... $997.75

That's it for today... I do believe, if I remember correctly, that this is the 20th anniversary of what was once our "new house"... Can't believe that 20 years has gone by in that house... Well, that was pretty cool seeing NFL football on the tellie again this past weekend, eh? College football, and baseball going on too... And can't forget to mention that our hockey Blues started training on Saturday for the upcoming season! WOW! Overload, Will Simpson, Overload! It's going to be a looooonnnnngggg season for our Rams... Gone are the days of the greatest show on turf... Now it's more like a comedic tragedy! I heard from someone that attended the To The Point News Rendezvous this weekend that I had to back out of... I'm really upset now that I wasn't able to go! UGH! Time to get going... I've got a ton of stuff to get done this morning... So, let's get working on making this Tuesday Terrific!

Chuck Butler
EverBank World Markets

Posted 09-15-2009 9:29 AM by Chuck Butler
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