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  • Fed floods the markets with US$...

    * Bernanke gets help opening the spigot... * Euro and Pound rally... * Yen to continue to benefit from carry reversals...* Aussie $ rallies... ** Fed floods the markets with US$... Good day...and happy Columbus day! This is an official bank holiday here in the states, so all of the banks are closed, but the stock markets are open. We will have a half day here on the desk to try and catch up with all of the work which has been piling up the past few weeks. The phones are turned off, since it is an official bank holiday, but we will be checking messages and try to get back to everyone as quickly as possible. It is a very unusual holiday, as the banks are all closed with no funds transfers possible, but the stock markets are open. Currency desks are lightly staffed, so we will have to really work to get the trades done this morning. These strange holidays usually can lead to some real market volatility, and with today will probably be another rollercoaster. In an all out effort to ease the credit freeze, the Federal Reserve recruited help from the ECB, Bank of England, and the Swiss central bank to flood the market with US$. These central banks will auction unlimited dollar funds with maturities of seven days, 28 days, and 84 days at a fixed interest rate. This move is unprecedented, as all previous dollar swaps were capped at a maximum amount while these auctions will be for unlimited funds....
  • A New Trading Theme...

    * Coordinated rate cuts...* Did the Fed reignite soaring inflation?* More pain in Iceland...* Revisiting the 90's in Japan... ** A New Trading Theme... Good day... And a Tub Thumpin' Thursday to you! Well... How about those wily veteran Central Bankers? They all got together and decided to cut rates... The Reserve Bank of Australia (RBA) went first with their 100 BPS cut, and opened the rate cut sea for the rest of the Central Banks around the world. The European Central Bank, The Riksbank (Sweden), Swiss National Bank, Bank of Canada, Bank of England, and the Bank of China all lined up at the rate cut table... The Bank of Japan, The Norges Bank (Norway), and Reserve Bank of New Zealand did not participate. The Bank of Japan doesn't have any rate to cut, The Norges Bank will wait until their regularly scheduled meeting on 10/15, and the RBNZ believes that they have taken their toxic waste bond flu shot......
  • Senate Passes The Bailout Package!

    * Euro falls to 1-year low.... * Bailing out foreign investors? * O'Neill has a better plan... * ISM collapses! But the dollar rallies... ** Senate Passes The Bailout Package! Good day... And a Tub Thumpin' Thursday to you! Rocktober started off with a bang for the dollar, as the green/peachback continued to gain VS the euro and other currencies, pushing the euro to a one-year low VS the dollar. We all sat here and shook our heads in disbelief yesterday, as the U.S. ISM Index (manufacturing) collapsed in September, but the dollar rallied anyway. The ISM Index fell from 49 to 43.5, the lowest print since Rocktober 2001, which happened to be near the end of the 2001 recession and right after the awful period following 9/11. So... To me... This really paints the recession picture clear and bright for all to see... So, why did the dollar rally with this albatross around its neck?...
  • Bailout Package Is Ready...

    * Ready to spend $700 Billion... * Wachovia wants to sell itself... * Dollar rallies hard... * The rot on the vine spreads... ** Bailout Package Is Ready... Good day... And a Marvelous Monday to you! A Wonderful Weekend for yours truly, as the weather was Chamber of Commerce like, I got to see all the kids, and little Delaney Grace two days! I also got to enjoy two football games, one that Alex played in, and one that Alex went with me to! Fabulous stuff! OK... The data on Friday was the stuff that should have sent the dollar to the woodshed, but like all the data lately, it just gets swept under the rug, as the market movers are myopic with the Bailout package. Lawmakers worked all weekend to iron out the details of the package, and King Henry (U.S. Treasury Sec.) has announced again that the package has been agreed on by Congress. The vote doesn't actually take place until tomorrow or Wednesday, but that hasn't stopped King Henry from pounding his chest over his latest victory. I like what I heard from former Fed Gov. (and Mark Twain Bank economist) Laurence Meyer, who said: "This has a reasonable chance of pulling back from the brink and having some success, but it's far from certain that will be the case."...
  • Goldman and Morgan Stanley Are Now Banks!

    * Currencies see some healing... * $1 Trillion and counting... * Gold and Silver rebound! * The Currency Capitalist... ** Goldman and Morgan Stanley Are Now Banks! Good day... And a Marvelous Monday to you! Someone along the road last week stopped by to tell me that I was too "Cheery" each morning with my salutations! He laughed, because of course he was kidding... But as I told him... If you're told what I was told last summer, each and every day is a day to be cheery about, no matter what's going on in the markets! Well... That was quite the trip last week, 3 cities in one week... In October I do 5 cities in 10 days... And then of course we had the goings on of last week... I really was upset and angry last week when I sent those notes to Chris for Friday's Pfennig. Our Gov't has spent 100's of Billions of dollars, and looking to spend more to avert a crisis... Yes, it was a Crisis, and something had to be done, but the way we did it, wreaks of socialism... My good friend, John Mauldin, whom I spent some time with last Friday, said, "I would sure like to see some regulation in Credit Default Swaps for all the money we spent!"...
  • Paulson speaks with forked tongue...

    * Paulson speaks with forked tongue... * Fed leaves rates unchanged... * A look back at the data... * Japan to weather the financial Tsunami... ** Paulson speaks with forked tongue... Good day...Another day, another $85 billion of US taxpayer used to bail out an ailing financial firm. Yes, our Treasury Secretary went on another shopping spree, and this time he was accompanied by Fed Reserve Chairman Ben Barnanke. Just two days ago, Paulson drew a line in the sand when he let Lehman Brothers collapse into bankruptcy. The non-action from Paulson was seen as a good move by most, as he was sending a signal to the markets that the US taxpayer couldn't be seen as the buyer of last resort for failed financial firms. And Paulson talked tough with regard to AIG. Paulson was asked about reports that AIG wanted an emergency loan to help it through its troubles. "What is going on right now in New York has got nothing to do with any bridge loan from the government," he replied. "What's going on in New York is a private sector effort, again, focused on dealing with an important issue that's, I think, important that the financial system work on right now, and there's not more I can say than that....
  • Congratulations to Chuck...

    * Great news from Chuck... * FOMC could lower rates... * TIC flows to slow... * Yen and SFR continue to rally... ** Congratulations to Chuck... Good day... I want to start this mornings Pfennig off with a note Chuck sent the trade desk last night: "The doctor called, and I'm CLEAN! My scans were clean, and, I'm officially off the Sutent, and considered a "Cancer Survivor" now! YIPPEE!" I know the markets are in a state of turmoil, but that great news from Chuck took precedence over anything I could write about the currencies. It looks like Chuck's positive attitude along with all of our prayers have beaten back the cancer (I guess his doctors and the new medicines deserve some of the credit also). Congratulations to Chuck, can't wait to shake his hand when he returns from the first week of the FXU tour. But now lets move on to the markets. I was so focused on the Wall Street turmoil yesterday that I failed to mention the FOMC will be meeting today. Just a few weeks ago, the markets were calling for an interest rate increase by the Fed to tackle inflation. But the events of this past weekend, along with a dramatic drop in the price of oil, has many calling for another interest rate cut. The Central Bank has already injected billions of money into the markets to try and calm them after the bankruptcy of Lehman. The Federal Reserve yesterday added $70 billion in reserves, the most since the September 2001 terrorist attacks. The funds were needed as banks and financial firms tightened up their lending in reaction to the financial turmoil....
  • Another Government Bailout!

    * Fannie & Freddie news... * Jobs Jamboree very disappointing! * Risk Taking back on the board! * Troubles brewing in China? ** Another Government Bailout! Good day... And a Marvelous Monday to you! We had some historic economic news over the weekend as the Gov't has decided to take over Freddie Mac and Fannie Mae... When I heard the news, I made sure I would check on the currencies later in the day when the Asian markets opened. At first, it was all dollar negative news, and the euro was flying high to near the 1.44 handle... So... I went to bed thinking that the markets would be a shambles this morning when I got to work, etc. etc. But, that's not the case, as I turned on the currency screens I saw the euro had lost all that ground it had gained and is back to looking sickly around 1.42 again. In fact, I just looked over, and the single unit has given up the 1.42 handle and is trading below... I'm searching and searching for news on this strong dollar move, and can't seem to find anything... So, I'll go on with the normal fun, and see if something pops up later as I go along......
  • A Huge Data Week...

    * Dollar rebounds... * Big Ben's imagination... * More Risk Events... * Inflation lights a fire under the loonie... ** A Huge Data Week... Good day... And a Marvelous Monday to you! A weekend that was supposed to be filled with rain, was nothing but sunshine, and beautiful days. For once, I didn't make fun of the weather people that make the forecasts! But, as always, it was too darn short! The alarm went off this morning, and for a minute I thought, "to heck with this, I'm going back to sleep!" But, then as always, I got up to start the day. Well... Recall on Friday, the currencies had rallied very strongly on Thursday, and it looked like a reversal of the month-long dollar rally could be at hand... I had this to say in Friday's Pfennig: "But today is a new day folks... And what happened yesterday is now history... The attitudes could change in a NY minute, and the dollar be back in favor. This is what I'm talking about when I say things are less secure. Wishy-Washy market sentiment leads to very volatile markets, and that's what we saw yesterday... Now, let's move on to today, and see what Bullwinkle has up his sleeve. Hey Rocky, wanna watch me pull a rabbit out of my hat?"...
  • Central bank intervention is the reason...

    * Central Bank intervention is the reason... * Busy data week... * Australia's central bank to mirror the BOE?... * China to slow appreciation ... ** Central bank intervention is the reason... Good day... I know most of you opened the Pfennig up this morning hoping to get a blast of Chuck's witty writing style. Well the airlines arranged for Chuck to stay in San Francisco a little longer, so you'll have to wait another day. The currency markets continued to get hammered by the US$ on Friday with the dollar index climbing all the way back above 76, a level we haven't seen since mid February. The dollar did sell off a bit in early European trading, but it has started to climb again as I write. Several readers sent me an excellent opinion piece by James Turk which appeared on GoldMoney's website. Mr. Turk points to central bank intervention as a major reason for the recent dollar strength. The article agrees with what I was saying last week; that the dollar has no fundamental reason to be rallying. The reports and news out of the US have not been favorable to the greenback, and the twin deficits in the US continue to soar out of control. I mentioned that the recent moves of the dollar smacked of intervention, as the dollar only wanted to move in one direction, ignoring any data which would typically send it back down. Turk points to some data which backs up this intervention theory....
  • Fed not as hawkish as expected...

    * Fed not as hawkish as expected... * Markets now turn to ECB and BOE... * Canadian dollar slides... * Aussie hit by 1-2 punch.. ** Fed not as hawkish as expected... Good day...I want to start off today's Pfennig by apologizing for those of you who were waiting to receive their Pfennig yesterday. I sent it off at the normal time, but we had some problems with the program which sends it out, so it was delayed in getting delivered. You can always view the current Pfennig at www.dailypfennig.com where we post it first thing in the morning. That website also has archived versions of past pfennigs for your reading pleasure! They tell me the problem has been fixed, so you should get this pfennig right on time. The dollar drifted higher throughout most of the day yesterday as the markets prepared for the FOMC rate announcement. The sentiment driving the dollar higher was that the Fed would sound much more hawkish in order to keep an overall consensus among the FOMC members. Dollar bulls were expecting a signal from Bernanke that an increase in interest rates would be just around the corner. These higher interest rate expectations encouraged traders to take the dollar index back up to just under 74, a level we haven't seen in almost two months....
  • A week of interest rate decisions...

    * A week of interest rate decisions... * Pound Sterling drops again... * Brazil and Mexico continue to dominate... * Gold and Silver fall... ** A week of interest rate decisions... Good day...The dollar stayed in the pretty tight range it has established over the weekend, gaining some strength over the weekend after losing some ground on Friday. Should be an exciting week as it is 'Interest Rate Decision' week as a number of central banks will be announcing their new rates. I think the rate announcements will reinforce my feelings that the world's economies are heading down divergent paths, with some economies heading down a recessionary path while others maintaining good growth rates. As expected, the US unemployment rose to the highest level in more than four years as employers cut jobs again in July. But the decrease in payrolls was slightly less than forecast, so some were saying 'it isn't as bad as we thought'....
  • RBNZ Cuts Rates...

    * The dollar swings it mighty hammer! * Weekly Jobless Claims spike! * Exposing the debt in N.Z.... * The Fed's Beige Book is grim... ** RBNZ Cuts Rates... Good day... And a Thunderin' Thursday to you! It's not so Thunderin' for me this morning, as I must have eaten something that didn't agree with me last night... Therefore I was up most the night sick... This will be ever so short-n-sweet, and then I'm going back to bed, I've got a presentation this afternoon with Addison Wiggin, I've got to be in tip-top shape for that! The dollar swung its mighty hammer again yesterday, bringing the euro to the 1.56 handle, with all the other usual suspects falling in line behind the euro. The markets are ga-ga with news that leads them to believe the "worst is over" in the credit crunch... I beg to differ on that, but then, I'm just one guy, one voice, one letter......
  • A Perfect Storm...

    * The euro runs into a summer storm... * Plosser wants higher rates... Yeah, right! * Aussie dollar strength to return... * Canadian inflation pops higher than expected! ** A Perfect Storm... Good day... And a Wonderful Wednesday to you! A great day yesterday, as I was able to meet up with old friends, readers, and well wishers... So many people were just glad to see me here! I told them it was good to be seen! Looks like the oil rigs dodged a bullet with Dolly in the Gulf Coast, and that's a good thing! But Dolly will still hit South Padre Island today, please keep that in your thoughts today... Well... You know how I explained on a couple of occasions in the past couple of weeks, a Perfect Storm for the dollar? Well, those never materialized due to a number of reasons... Yesterday, we finally got that Perfect Storm, but it wasn't for the dollar... You know those Mid-Western summer storms, when in the middle of the day, it turns pitch-black, and the trees all begin bowing from the wind, and then the rain comes down hard? Well, that's much like what happened yesterday with the euro... Here's the skinny......
  • More Losses!

    * Currency rally runs into profit taking... * Mortgage related losses continue to mount... * Taking risk... Just seems stupid right now... * Canadian Retail Sales post a gain... ** More Losses! Good day... And a Terrific Tuesday to you! It was a long day of travel for yours truly, who saw two gate changes and two plane changes along with 1.5 hours of delay... I ran into a reader on the plane, that said, Hey! Aren't you Chuck Butler? I could see all the people sitting around me thinking that they should know Chuck Butler, he must be a celebrity! HA! Little did they know, it's just little Ole me, the Pfennig writer! Well... The currencies had a good day VS the dollar, as the euro was able to gain well into the 1.59 handle... Part of my presentation to the main stage crowd tomorrow (900+) is going to ask the question... Where are all those people that claimed the weak dollar trend was over last month when the Fed stated they were going to be inflation fighters? They are no-where to be found! That's where! I recall that even a big name guy at the Royal Bank of Canada, flatly stated the weak dollar trend was over... Where have all the naysayers gone? Long time passing......