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In This Issue.
* Currencies & metals level off .
* ZEW climbs out of hole.
* Franc deposits get charged interest .
* Carney to speak today.
And, Now, Today's Pfennig For Your Thoughts!
German Business Confidence Jumps!
Good day. And a Tom Terrific Tuesday to you! Front and center this morning, please accept my apology for the Pfennig faux pas yesterday. I can't really explain what happened because I don't know how Friday's Pfennig went out again. But it did. The great thing about it was that if you missed Friday's letter, it was your second chance to read it! HA! A good friend of mine, told me that he thought I was just trying to point out something I said on Friday. Oh well. Good thing that doesn't happen all the time!
Well, the currencies leveled out yesterday, and the euro gained about ¼-cent on the day, with the Aussie dollar (A$) trading at $1.05, if only briefly. Gold held onto its gain for the day, and it appeared that the dark cloud that hovered over the currencies and metals was being lifted throughout the day. When I turned on the currency screens this morning, I saw that some additional lifting of the dark cloud has occurred in the overnight markets. And so, we begin our Tom Terrific Tuesday!
The euro has received some additional boost this morning from the printing of German Investor Confidence, as measured by the Think Tank ZEW. German Investor Confidence climbed out of the hole they dug for themselves in October, and jumped to a number of 6.9 from a minus 15.7 the previous month. This report was in contrast to what I told you last week about how the Bundesbank had cut their economic growth forecast for 2013. In this case, I think the markets and businesses are looking at the bond purchases by the European Central Bank (ECB) as a very favorable scenario for Germany.
And. I still believe that we will continue to see relative calm claim more days in the Eurozone than Chicken Little Days. And as that happens, I think we'll see an economic revival led by Germany. Now. that's just how I see it happening, but I'll betcha a dollar to a Krispy Kreme that the first time I mentioned that I believed that we could begin to see some stability in the Eurozone, that you thought I was ready for the loonie bin. But, look around and see what's happening in the Eurozone. some semblance of stability, and relative calm.
OK. enough of that! One of these days I'm going to have to pay off all these dollar to Krispy Kreme bets I've made! Or. collect on them! Ahem. I'll take the Krispy Kreme doughnuts at least I can taste them!
The Aussie dollar (A$) remains well bid. overnight the price of iron ore reached a 4 ½ -month high, and was a good underpin for the A$, as a Business Survey for November was very weak, and could have caused some selling of the A$... But the rising raw material price was enough to keep the A$ well bid.
Across the Tasman, the New Zealand dollar / kiwi is trading at a 5-week high (.8375) on news that New Zealand housing continues to recover. But for the most part, kiwi trades on the coattails of the A$... It wasn't always this way, and I don't believe it will remain this way, but for now, it is what it is. (that's my fave saying these days) The 'technical guys" show kiwi gaining to a 9-month high (.8470). So, I guess we'll have to wait-n-see, eh?
Well. the rumors I was telling you about regarding Swiss Banks charging for franc deposits, is now a fact. We received notice from UBS (Credit Suisse had already made the same announcement) that deposits of francs would now be charged interest. The franc lost some additional ground to the euro, and remember that cross that about a year ago was pushing the envelope of the ceiling cross at 1.20? Well, a year later that cross between euros and francs stands at 1.2110. and falling. Long time readers will recall that I told you that the Swiss National Bank (SNB) wanted to see the cross around 1.30-1.35. Well, the SNB would still love to see the cross at those weak levels. But all the problems of the Eurozone (see Greece, Italy and Spain) the past year, made things difficult for the SNB. But, now take that discussion above about the relative calm in the Eurozone, and the SNB might just get their wish!
Eventually, the euro / franc cross will carry over to the dollar/ franc cross. for if the franc is getting weak VS the euro, it will eventually get weaker VS the dollar.
Speaking of getting weaker VS the dollar. I see where the Chinese renminbi/ yuan backed off its ascent to the upper end of its trading band last night. Rumors have it that the Chinese Gov't / Central Bank, intervened to stop the appreciation in its tracks. I think that the Chinese leaders are just wanting to throw some cold water on the markets' speculation that the Chinese economy has turned onto recovery street. The Chinese leaders just don't want the markets to get ahead of themselves. You know me though. I don't like intervention. but, I understand why the Chinese would use it right now. But remember, the Chinese can only set the "fixing rate", after that the offshore market in Hong Kong trades it and things there can get pretty dicey at times.
Well, get the board games out. (Hey! I call Battleship!) The Fed's FOMC will begin a two-day meeting today, with a rate announcement tomorrow afternoon. Maybe the Fed Heads will be practicing their gangnam style dancing instead of playing board games for two days. Recall that I told you a couple of weeks ago that some Fed Heads were talking about increasing their bond buying? Well, this could be the meeting that they bring that discussion out in the open.
As it stands right now, the Fed is buying $40 Billion in mortgage bonds each month. I would look for the Fed Heads to announce an additional $45 Billion in monthly Treasury bonds that they will buy, which would push their balance sheet to $4 Trillion. So, why all this additional stimulus if the economy is doing OK, like the Gov't tells us through their hedonic adjusted economic data reports? Ahhh grasshopper. I told you a long, long time ago, that the U.S. economy has become addicted to stimulus. And the economy has a "friend" in the Fed Heads that believe the economy can't function without stimulus. I can hear Big Ben Bernanke now, saying that "this stimulus is what's needed to sustain the economy"
The market's reaction to such an announcement? Probably muted. we certainly won't see the all-out assault on the dollar like we did with QE 1 and QE 2. As I like to say over and over again. We Have Become Comfortably Numb.
The Canadian dollar / loonie, backed off some overnight, as traders prepare for a Bank of Canada Gov. (Carney) speech today. I will be interested in the press conference after the speech, where I've heard that reporters are going to ask Carney, who is moving on to become the Gov. of the Bank of England, about his preference for forward rate guidance. Why would they ask him about that, I hear you asking? Because. The current Bank of England Gov. King, recently dismissed the usefulness of such guidance. This could get juicy!
I had to stop to sing along and dance in my seat to the Foundations' great song, Baby, Now That I've Found You. Remember that one? That's what's great about an iPod, great songs are not forgotten! Mike is here now, and I'm sure he's wondering what's so good about the song! Kids.
I haven't talked about Norway and Sweden lately. and that's because not much has been going on in these two countries. The markets are still using the same brush on the krone and krona that used on the euro. Although, I'm of the opinion that we're beginning to see divergence between currencies return to the markets, and that would be a great thing for these two countries, for their fundamentals are far better than those found in the Eurozone. And then we could get back to using them as true alternatives to the euro.
I saw this yesterday and it just hits me in the gut every time I see stuff like this. here in the U.S. there are now 47,710,324 people enrolled in the food stamp program as of the end of September. That's an increase of over 607,000 people since August! That means that 1 in 6.5 people in America are on food stamps. Back in the 1970's, it was 1 in 50 ! We should strive to get back to that again!
Then There Was This. from CNS News. "In June, a total of 142,415,000 people were employed in the U.S, according to the BLS, including 19,938,000 who were employed by federal, state and local governments.
By November, according to data BLS released today, the total number of people employed had climbed to 143,262,000, an overall increase of 847,000 in the six months since June.
In the same five-month period since June, the number of people employed by government increased by 621,000 to 20,559,000. These 621,000 new government jobs created in the last five months equal 73.3 percent of the 847,000 new jobs created overall.
Chuck again. that means that 73% of New Jobs Created in the last 5 months are in the Government! That's one way to make the unemployment rate fall, and have everyone think you're doing great!
To recap. The dark cloud that came over the currencies and metals on Friday, began to get lifted yesterday and the lifting has continued through the overnight markets to this morning. German Business Confidence really jumped out of the hole it was in, and reflects on my call that relative calm could return to the Eurozone. The A$ and kiwi remained well bid throughout yesterday and overnight. And the BOC Gov. Carney's speech today could get good.
Currencies today 12/11/12. American Style: A$ $1.0495, kiwi .8370, C$ $1.0130, euro 1.2985, sterling 1.61, Swiss $1.0725, . European Style: rand 8.6805, krone 5.6510, SEK 6.6570, forint 217.15, zloty 3.1490, koruna 19.4630, RUB 30.69, yen 82.45, sing 1.2210, HKD 7.75, INR 54.27, China 6.2446, pesos 12.78, BRL 2.0755, Dollar Index 80.13, Oil $86, 10-year 1.63%, Silver $33.20, and Gold. $1,713.80
That's it for today. Well. a quick visit to my oncologist here in St. Louis (the real one is at MD Anderson in Houston) to have my liver, thyroid, and kidney functions checked, (they are at some risk with the chemo I take) showed they are fine. So I've got that going for me! And so, next week I start my 4th month on the drug that saved me from having my jaw removed. I can't even come close to telling you how happy I am about that! I just wish there could have been something to save my eye a couple of years ago! I have articles to write this week for three different publications, so, I'll hunker down in my office and attempt to get them completed before I walk out the door for my Christmas vacation on Friday! And with that. Thanks for reading the Pfennig and I hope you have a Tom Terrific Tuesday!
EverBank World Markets
12-11-2012 3:01 PM