The Mini-Rally For Currencies Continues...
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In This Issue..

* Euro takes baby steps higher...                                     
* Canadian Retail Sales disappoint...                                        
* Oil price plunge hurts petrol currencies...                                            
* Brazilian real drop on Wealth Fund selling...                                                                                                          

And Now... Today's Pfennig!

The Mini-Rally For Currencies Continues...                                             

Good day... And a Marvelous Monday to you! Well... We made it through the weekend, here at the Butler house, just Alex and me. Had some visitors (friends) stop by Friday night, but after that, it was just us two. Good games yesterday, eh? I had all the snacks out on the table, and thought the older kids would stop by to watch games with us, but, that was a wasted effort on my part, as they did not, and then I had to clean all that up!

Well... On Friday, the currencies kept with their mini-rebound VS the dollar, for the most part, as the Big Dog, euro crept higher and higher, but in tiny, baby steps for sure! It's as if traders are wanting to take the euro higher, and sell the dollar, but they just aren't sure, right now...

Stocks got hammered on Friday in reaction to the President's proposed ban on proprietary trading in Banks... You know, it occurred to me that the Gov't does this, the media does this, and now I've gotten too lazy and do it... And that's to say "Banks"... What they mean here are the investment Banks, like the Goldmans and the Morgan Stanleys... And yes it does include "real" banks, but for the most part they are the ones that do more on the investment side than they do on the deposit side...

I didn't like seeing the stocks get hammered on Friday, although, I've been calling for a stock market correction for about 5 months now. The thing I did like to see happening was the fact that stocks were getting sold, and the currencies remained well bid VS the dollar... Another chink in the armor for risk assets getting all thrown in the barrel together? I would like to say yes!

And... That could be a good sign, for I'm of the belief that stocks have further room to correct, but then, I'm not even your last pick on the team for stock jockeys, folks...

The price of Oil has fallen significantly in the past week, and this morning it's sitting there with a $74 handle... Very interesting... Good for us, and our inflation outlook... But bad for the petrol-currencies of Canada, U.K., Norway, Mexico and Russia.

But come on! Do we really believe that Oil prices are going to continue to go downward? This isn't possible in my mind... Well, wait a minute, of course it's possible... Just not probable, I should have said!

Speaking of Canada... On Friday it was announced that: Canadian November retail sales fell 0.3% which was slightly greater than the 0.2% drop expected going into the report. So, the loonie has had to deal with that and a lower Oil price... It wasn't a good week for the loonie...

Another currency that had a rough go of it last week, was the Brazilian real... The Brazilian Sovereign Wealth Fund (SWF) has really hit the ground running in their attempt to weaken the real... They have done so, by selling reals and buying dollars by the truckload in the past two weeks. One has to wonder, just how deep their pockets are, don't you think? For... I truly believe that investors are just champing at the bit to buy at these cheaper levels, given the forecast, which I've talked about before here, for higher interest rates in Brazil this year...

So... It's a cat and mouse game between the SWF and investors / traders / others, who want to buy reals, but not knowing just how deep the SWF's pockets are...

I see that the Bloomie is announcing that they will show a debate today on Bloomberg TV, regarding the question, "Is California the nation's first failed state?" I don't know what there is to debate... Yes, they are! But they won't be the only one!

The data cupboard was empty on Friday, and will only yield data on Existing Home Sales today... But tomorrow, tomorrow, no stop! Tomorrow the beginning of one of those two-day FOMC meetings, when all the board games come out, and the Fed Heads spend the days playing games like Candy land, and Battleship... But their favorite game, of course, is Monopoly... They just love playing with Monopoly money... So much so, that they carry it over to real life with the dollar!  HA!

Gold dipped below $1,100 on Friday, albeit briefly, with $1,100 looking like the line in the sand that Gold traders have drawn to indicate they do not want to cross that line... Of course that doesn't mean a hill of beans, should the selling continue... The selling has all been tied to the call for higher interest rates here in the U.S. Apparently, these guys calling for higher interest rates, haven't been listening to the Fed Heads as they hit the speaking circuit... They have all sung from the same song sheet on this one folks, and they have all said the same thing... That, interest rates will remain at current levels for some time to come!

We'll get more of this when the Fed Chairman, Big Ben, speaks at the end of the two-day meeting tomorrow afternoon.

A reader dropped me a line on Friday, and said that he was confused as to where I was getting my 10-year Treasury yield, which I had posted at 3.38% for a couple of days... I then went to my "live trading screens" and saw that the 10-year yield was more like 3.65%! UGH! Then I realized that I had been writing from home, and I don't have "live trading screens" at home... Apparently, the "source" I use to get this data, hasn't been updated in a week! UGH! I went to see what it was showing this morning, and it's still at 3.38%... So, I'll have to deep six that source and find another... Sorry for the confusion... I'll be back in the saddle tomorrow morning, as my beautiful bride returns home this evening, and my morning, duties with Alex will end...

OK... I have to get this off my chest... So... If you're so inclined not to deal with me on the soapbox this morning, then skip ahead  a couple of paragraphs to the Big Finish...

OK... So I ruffled a few feathers on some readers last Friday... One guy even likened me to a Jr. High School writer! Well, since I didn't write until I was an adult, I guess I don't really know what he was referring to! But, let's put this in perspective... My perspective, of course... This is my letter... It has always been a collection of my thoughts, and opinions on things that move currencies... I know that many times it seems as though I'm stretching things and pushing the envelope, but trust me, I wouldn't talk about it seriously if it didn't have something to do with currencies... And... Most of the time, currency movements are triggered by what goes on here in the U.S...

So... Friday, I criticized the Gov't for what they are trying to pull off, without any opinion as to how I would fix things... And you know, that I would have an opinion on how things should work!

So... I would have regulated them (the financial institutions and lenders) more... in other words... AUDIT THEM TRUTHFULLY, and not Bernie Madoff style audits!
These regulators have the power to make a financial institution change the way they do things, or put in more circuit breakers... They would have also stopped lenders from the lending practices that were so much a part of this debacle... I have been in the investment divisions of banks since 1979... I KNOW that they have the power to regulate using current laws!
You don't need to stop these people from doing business, for there will be unintentional consequences... you just need to make them cross the "T's" and dot the "i's"!

And... You certainly don't need to punish / tax these businesses to generate money for the government to spend! That's right! If you give the Gov't money, they are not going to pay down their deficit, they'll just find new things to spend it on, making our situation worse, for, you know that they'll spend more than they take in!

Then there was this... A reader sent me a link to a Panama newspaper the other day, and in the paper it was reported that 17% less freight is going through the Panama Canal these days... In December (last month) alone, the fall was 9% from the previous December... And here's a telling figure... in 2009 there was an increase of 13.9% of empty containers compared to 2008. Empty containers going through the Panama Canal... Interesting, don't you think?

To recap... The currencies have added to their mini-rally VS the dollar overnight, and looks as though traders want to take them higher VS the dollar, but just aren't sure yet... Oil has fallen by quite a bit in the past week, hurting the petrol currencies. And Brazil's Sovereign Wealth Fund has hit the real's value VS the dollar, very hard in the past two week, causing the real to fall quite a bit VS the dollar... Just how deep are the Wealth Funds' pockets is the question now...

Currencies today 1/25/10: American Style: A$ .9080, kiwi .7155, C$ .9480, euro 1.4190, sterling 1.6170, Swiss .9645,  European Style: rand 7.5560, krone 5.7855, SEK 7.19, forint 190.75, zloty 2.8610, koruna 18.3370, RUB 29.98, yen 90.20, sing 1.3990, HKD 7.7670, INR 46.10, China 6.8270, pesos 12.80, BRL 1.8250, dollar index 78.07, Oil $74.53, 10-year 3.62%, Silver $17.19, and Gold... $1,100.50

That's it for today... Well, like I said above, those were some good games yesterday, not, of course if you are a fan of the Jets or Vikings... I understand... I thought the Vikings actually should have won, but they gave the ball away too many times, and like my old football coach would preach... "You can't make mistakes and win!"  We're still dealing with gray, foggy, rainy days here in St. Louis, I don't recall the last time I saw the sun... Talk about depressing! I'm heading to San Antonio later this week, Chris will have the conn on the Pfennig Thursday and Friday. I'll be speaking to a private group of people, very much like the group that I spoke to in St. Louis, last month. And then next week, I head to Orlando, where I'll be speaking 3 times in 4 days... It would have been 4 for 4, but the Big Boss, Frank Trotter, is going to come down and take the 4th talk for me! YEAH!  We love having the Big Boss around at these shows, for whatever time he can allocate to them! OK... I've got to get going... I've got things to do before Alex wakes up! I hope you have a Marvelous Monday!

Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-647-3837





Posted 01-25-2010 10:50 AM by Chuck Butler
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