Waiting On The ECB...
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In This Issue..

* Currencies slip a bit overnight...

* U.S. Manufacturing is stronger?

* Aussie Trade Surplus narrows...

* Riksbank hikes rates 25 BPS...

And Now... Today's Pfennig!

Waiting On The ECB...

Good day... And a Thunderin' Thursday to you! Don't know about where you are, but here in St. Louis, it's stormy weather... Oh Boy! Just in time for Alex's first freshman football game tonight... Talk about fun... Sitting on metal bleachers in the rain... I can't wait!

As I turn on the currency screens this morning, I see that the euro is higher than it was yesterday morning, but lower than it was mid-day yesterday, as the single unit rallied to 1.2850 yesterday, only to see that figure slip slidin' away, and then watch it rise again...

This morning, the euro has gone back and forth because of the European Central Bank (ECB) meeting that's going on as I write. The thought here is that ECB President, Trichet, could announce plans on an exit strategy for the stimulus that's set to expire next month... Traders are going back and forth on whether this would be good for the euro or not good for the euro. I said something's wrong, now I long for yesterday! Really! What does it matter when they announce the exit plan? Wouldn't it make more of charge in the shorts of traders if they actually saw the exit plan going into motion? You see... Just because a Central Bank says they're going to do something in the future doesn't mean it's cast in stone...

The strength that we saw in the Aussie dollar (A$) yesterday morning, continue to be added to as the day went on yesterday, and climbed as high as 91.17-cents... However, overnight, Australia's run of strong economic data reports hit a speed bump, when Australia's Bureau of Statistics said their July Trade Surplus fell to A$1.89 Billion from A$3.1 Billion in June... And that put a spanner the works for the A$... The slippage hasn't been bad... In fact, it's been small, but enough to bring the A$ back below 91-cents, to 90.85-cents...

Kiwi saw some love from traders and investors as the day went on yesterday, and then added to overnight. But all the love in the world isn't going to help the A$ and kiwi if tomorrow's Jobs Jamboree in the U.S. is as bad as forecast... How bad is it? Sounds like a bad joke... But here in the U.S. it is forecast that we'll have lost 100,000 jobs in August...

The ADP Employment Change report printed yesterday, suggests that we'll see 10,000 jobs lost in the Jobs Jamboree number on Friday... This data is a wildcat, and one never really can use it to determine what the Jobs Jamboree number will hold... No wait! Because of the hedonic adjustments that the Bureau of Labor Statistics does on the Jobs number each month, maybe ADP is correct, and the Jobs Jamboree is the wildcat report!

Well... Mark one up on the wrong side of the ledger for yours truly again yesterday, as the ISM Index (manufacturing) number rose in August... Strange but true, according to the Gov't. The index number went higher from 55.5 to 56.3, it was forecast to be 52.8...

So, the performance of manufacturing was good in August... Hmmm... ISM Prices Paid though was also higher? So... Are we seeing some inflation? Personally, I've seen inflation in the things I spend money on, so I'll argue till the cows come home against the thought that "all we have is deflation"... And I'm also not saying that there's no deflation in some prices...

Construction Spending was down -1% in July, and Vehicle Sales were down in August...

It's a Thursday, so that means the Weekly Initial Jobless Claims will print this morning, along with Factory Orders for July, and the very stupid Productivity final print for the 2nd QTR... Unit labor costs are expected to have risen in the 2nd QTR by 1.2%... Hmmm... Interesting... Very interesting...

I see where the U.S. Treasury is going to auction a total of $67 Billion in Treasuries... I've been tracking this number, and it has been falling the past 3 months. Now, that's interesting, because our deficit has been rising in those same 3 months. In August $74 Billion was auctioned, and in July $81 Billion was auctioned...

I saw yesterday, where the Bank for International Settlements (BIS) said that Global currency trading had reached $4 Trillion per day... And then a day later, The French have proposed a tax of .005 on currency transactions to raise, what they think will be, $35 Billion per year. It's going to be discussed at the U.N. Right now, the U.S. is not a part of the countries agreeing to this tax. Let's hope it stays that way!

Oh, this is nothing new... About every 7 years or so, this subject comes up, as people that need money because they've spent too much, look for ways to steal some money... OK, maybe that "steal" word was a little harsh... But, think about it, they spend too much on stuff that doesn't matter, and then they have to find a way to pay for it... Taxpayers are normally in line to have money taken from them... I tell you this... If they begin to tax currency transactions, you'll see the amount of tax rise continually... For if they can get .005 now, the next step is to get .010, then .100, then... Well, you get the picture...

Ok... I'm stalling, in hopes that the ECB will finish their meeting and Trichet will speak before I hit the send button, this morning...

Well, while I'm stalling, I might as well, come right out and admit that I had a major faux pas in the Pfennig yesterday... Remember my tirade about the deficit, and numbers from the Treasury Monthly Bulletin? Well, now I have my tail between my legs... I simply forgot that the U.S. fiscal year runs from Sept. to Sept, and doesn't begin in January like the rest of us! So... My total deficit number was off... And for that I apologize, thanks to a long time reader for brining that to my attention!

I saw a report this morning on the Bloomie that caught my eye... The title read: U.S. Avoids Recession as Data Can't Get Much Worse...

Why can't it? An researcher over at BofA / Merrill Lynch gets to this conclusion from the thought that, "the sectors of the economy that traditionally drive it into recession are already so depressed it's difficult to see them getting a lot worse."

Hmmm... I wonder if he said this before or after Auto Sales reported a 21% decline!

OH! I almost forgot to mention that Sweden's Riksbank raised their internal interest rate 25 BPS (1/4%) this morning. The accompanying Riksbank statement had very little to say about the rate hike, so... It's just like I said it would be... The Riksbank hiked, but tried to throw the markets off the scent of their rate hike policy... Is it aggressive? Or not? The markets don't know, because the Riksbank won't tell them... And that, my friends, is not going to help the krona...

And a currency that I forget to talk about more often, because, there's just not a lot to talk about on most days in Brazil, but the Brazilian real caught some major wind in its sails yesterday, after the Chinese manufacturing report was strong. Recall, that China and Brazil have locked trading arms, and the flow between the two is strong... So, to hear that things continue to be strong in China, was good news for the real!

And I can't forget to mention the Swiss franc, as it nears parity to the dollar once again... The Swiss franc is the best performing currency in the past 3 months, up 14% VS the dollar. Recall that it was 3 months ago that the Swiss National Bank (SNB) said that they were no longer going to attempt to stem the franc's rise...

Then there was this... Economist Christina Romer, outgoing chairwoman of the Council of Economic Advisers, said in her final speech as a part of the Obama administration that the economic recovery needs to be supported by tax cuts and increased government spending. "While we would all love to find the inexpensive magic bullet to our economic troubles, the truth is, it almost surely doesn't exist," she said. That means the U.S. economy is on a dangerous path, according to The Economist.

Chuck again... Whew! Good thing this woman is on her way out the door! That's part of what got us in this problem to begin with... Tax Cuts, that everyone loves, but not with spending cuts, but increased spending! OMG! Why can't these mental giants see this! You can't cut taxes and spend more! Cut taxes, but cut spending too... Geez Louise! Sanity Now!

To recap... The currencies performed nicely yesterday and overnight. We've seen some slippage this morning, but not much so far. The ECB is meeting this morning, and the big question is about when the ECB will announce their exit strategy for the stimulus that is scheduled to expire next month. The Aussie Trade Surplus narrowed in July, and The Riksbank raised rates 25 BPS this morning.

Currencies today 9/2/10: American Style: A$ .9090, kiwi .7160, C$ .9525, euro 1.2830, sterling 1.5410, Swiss .9890, ... European Style: rand 7.26, krone 6.1585, SEK 7.2650, forint 221.50, zloty 3.0940, koruna 19.2420, RUB 30.71, yen 84.15, sing 1.3465, HKD 7.7720, INR 46.73, China 6.8070, pesos 13.05, BRL 1.7460, dollar index 82.39, Oil $74.04, 10-year 2.59%, Silver $19.42, and Gold... $1,247

That's it for today... I received a file from the PR people with my brief interview with the Street.com the other day... I think it was edited, but here's the file if you have a computer with speakers... It's just my voice, which is good, because I have a face for radio! http://www.thestreet.com/video/10848529/gold-prices-swing-both-ways.html?cm_ven=RSSFeed#600319596001

The Big Boss, Frank Trotter, gave me a book the other day, titled: The Evergreen Portfolio, by Martin Truax and Ron Miller. Frank wrote one of the chapters in the book on Currencies: adding global clout to your investment portfolio... WOW! Great job Frank! You can probably find the book on Amazon...

OK... I tried to stall, but I just remembered that the ECB announces the rate decision, and then waits a bit to begin their press conference... So, I'll just report on it tomorrow, folks... Time to go, I hope your Thursday is Tub Thumpin' and not Thunderin' like mine!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837





Posted 09-02-2010 9:54 AM by Chuck Butler