House prices in the US hit a new post crisis low...
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In This Issue.

* House prices in the US hit a new low...

* Euro rallies as EU finance leaders prepare to meet...

* UK economy sank in the 4th quarter...

* Commodity currencies retreat...

And, Now, Today's Pfennig For Your Thoughts!

House prices in the US hit a new post crisis low...

Good day...

The dollar rebounded from 3 straight days of declines yesterday as data released in the US increased investors worries about the recovery here in the US. The CaseShiller home price index released yesterday morning showed US home prices are now at the lowest level since the US financial crisis began. Prices have yet to find a bottom, as huge bank inventories of foreclosed homes continue to keep prices down. Economists had predicted the fall, and most believe the housing market will plateau sometime this year before beginning a sluggish recovery.

Another report showed US consumer confidence is holding steady. The confidence number came in at 70.2 for the month of March, a drop from the previous month. February's reading was revised up from 70.8 to 71.6. Increased gas prices are being partially offset by an improving labor market.

The last report released yesterday here in the US showed growth of manufacturing in the Richmond Fed region slowed to the lowest level this year. Any number above zero still indicates growth, and the reading was at a 12 month high of 20 last month, so a slowdown had to be expected.

Today we will get the durable goods numbers for the month of February which are predicted to have increased to 3% from a negative 4% reading last month. Orders for aircraft surged last month which should help push this number back into positive territory. Capital goods orders are also expected to have turned positive in February after posting a negative number in January. Tomorrow we will get the GDP readings along with our weekly jobs data, none of which are expected to show a big gain.

The euro was one of the few currencies which increased in value yesterday as European leaders projected confidence that the region's crisis could be nearing an end. Euro area finance ministers will be meeting this weekend in Coppenhagen to discuss an increase in the capacity of the bailout fund. Currently there are two different bailout funds which the EU has funded. The first is the European Financial Stability Facility which was originally meant to be a temporary source of funds for troubled countries. This lending facility was hastily put in place as the European bond markets were nearing collapse. Another fund, the European Stability Mechanism was organized as a more permanent solution, and was meant to take the place of the first. But many EU finance ministers would like to see both of these pools of money stay in place, creating a larger backstop for the sovereign debt markets. Germany swings the biggest hammer in the EU, so German Chancellor Merkel's indication that her country would back plans for the funds to run in parallel was positive news for the euro area.

The euro surged through a resistance level just below $1.33 two days ago, and has been trading in a relatively tight range since. According to a couple of reports I read last night, the next 'resistance' level for the euro is at $1.3487 which was the highs it posted back at the end of February. There is strong support for the euro at $1.33, so that seems to be the range we will see it trade within until we get something to move it one way or the other. The European debt crisis may have been pushed off the front pages by the Supreme Court hearings on health care, but I'm pretty sure we have not seen the end of drama out of Europe.

Sweden's krona had a good day, advancing against all of the major currencies. Sweden's consumer confidence index rose as did the manufacturing confidence index, according to reports released today. The consumer confidence index rose to a 0 reading from a minus 3.2 last month, and the manufacturing confidence number rose from minus 13 to positive 1. Economists had predicted both readings would remain in the negative territory. Sweden is one of Europe's most productive manufacturer, so the gain in manufacturing confidence was a welcome surprise. The positive confidence readings will probably keep the Swedish central bank from further cuts to its benchmark lending rate. The Riksbank lowered these interest rates for a second consecutive time during its meeting last month, but rates now look like they will remain where they are for the remainder of the year.

The pound sterling fell vs. the euro and was also down a bit vs. the US$ after a report showed the UK economy shrank more than originally estimated during the last quarter of 2011. UK GDP dropped .3% during the 4th quarter of 2011 compared to an earlier estimate of .2%. As Pfennig readers may recall, the BOE voting members were split last month on whether to increase the amount of bond purchases making up their latest round of quantitative easing. BOE Governor Mervyn King said yesterday he has an open mind on whether more monetary stimulus is needed.

The possibility of the need for additional stimulus measures caused the pound sterling to fall the most in five weeks against the euro. Technical analysts over at Citbank are now predicting the pound could fall to levels we haven't seen since the 1980's. Neither Chuck nor I are big techie guys, but we definitely listen to what these guys say as the currencies do seem to follow patterns. According to the guys over at Citi, the pound's gains this year vs. the US$ put it close to a 200 week moving average, a technical level breached in August 2008. This moving average, coupled with a trend line dating back to 2007 could reverse the pound's direction and potentially push it back to $1.3255. So the recent move higher is the reason the technical analysts now believe the pound will drop to a 20+ year low?!? Clear as mud right? We actually have some technical traders who will call into the desk and want to place an order to buy a currency at higher levels than it is trading right now (so you don't want to buy euros at $1.30 but you want to buy them if/when it reaches $1.32). Again, neither Chuck nor I pretend to understand what these technical guys are looking at, but I did feel the need to share this news on the pound, as it is definitely predicting a big dip for the sterling.

The commodity currencies suffered yesterday as global stock markets fell, indicating investor confidence in the global recovery was waning. So it was a 'risk off' day. I had a couple readers ask me what I meant by risk-on / risk-off, so I will take a second to explain. When investors feel confident regarding the global economy, they are willing to take more risks, including placing investments into higher yielding 'risky' currencies such as the New Zealand dollars, South African rand, and Brazilian real (a risk on day). In contrast, when investors are worried about global growth they tend to pull funds out of riskier assets, and move into what they consider safe havens of the US treasury market, the Japanese yen, and to a lesser extent recently the Swiss franc. So yesterday was a risk off day as global equity markets declined and caused investors to move back into the dollar.

Then there was this...I have been sharing the improvements our new WorldMarkets system will be bringing to our investors. Another improvement will be monthly consolidated statements. Those of you who hold one or several WorldMarkets access accounts have become accustomed to a deluge of mail from EverBank on a monthly basis. Beginning in April, these statements will now be combined in one convenient consolidated statement of your WorldMarket holdings. These statements will include the current estimated values of all of your WorldMarkets investments including Access accounts, WorldCurrency single and basket CDs, Non-FDIC insured Metals, and any MarketSafe CDs which you own. You will be receiving one last group of statements from our existing system for the month of March, but you can look forward to an improved consolidated statement at the end of April.

Currencies today 3/28/2012. American Style: A$ $1.0419, kiwi .8196, C$ $1.0045, euro 1.3360, sterling 1.5923, Swiss $1.1075. European Style: rand 7.6382, krone 5.6973, SEK 6.6477, forint 218.63, zloty 3.1085, koruna 18.4008, RUB 29.2008, yen 82.99, sing 1.2559, HKD 7.7631, INR 50.785, China 6.3056, pesos 12.718, BRL 1.8220, Dollar Index 79.016, Oil $106.39, 10-year 2.21%, Silver $32.5125, Gold $1,678.15, and Platinum $1,636.25.

That's it for today... One day closer to our conversion. It may seem like I am making a big deal out of this, but it is! This project has been taking a majority of my workday for the past 3 years, so it is a really big deal for me, and a big improvement for all of us on the WorldMarkets desk. We will be spending the next few nights working on the conversion, so last night was probably my last full night of sleep until next week. Time to get this out the door now, so I hope everyone has a Wonderful Wednesday and thanks for reading the Pfennig!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837





Posted 03-28-2012 12:43 PM by Chuck Butler
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