In This Issue Currencies carry rally throughout

first_imgIn This Issue.*Currencies carry rally throughout Wednesday. *A$ trades though 200-DMA! *Canadian economic data continues to be strong. *Putting the kyboshes on a Swedish rate cut!And, Now, Today’s Pfennig For Your Thoughts!Cheap Currencies Don’t Guarantee Strong Exports!Good day. And a Tub Thumpin’ Thursday to you! How was your Wonderful Wednesday? I went to the Cardinals NLCS Game, and after sitting out and waiting 3 ½ hours of a rain delay, (which began in the 7th inning) was rewarded with a 3-1 victory. So, not too shabby. But. a late night for me on a school night for sure. So, I seem to be running late this morning for some reason, but don’t worry, I’ll try to make up the time in the air!Well. the Currencies continued to push the envelope VS the dollar yesterday. The Aussie dollar (A$) was really kicking sand in the face of the U.S. dollar yesterday, gaining over 1 full cent on the day!  So. all those traders that sold their A$ futures in the past two weeks, are piling back in, I bet!  The euro stalled out just above 1.31. But the rest of the “little dogs” were off the porch and chasing the dollar down the street.But that was yesterday, I had the world in my hands, But it’s not the end of my world, just a slight change of plans. Ooops! I don’t know what starts these fat fingers down these lyric roads, but here I am doing it again!  But seriously. That was yesterday. and some of the currencies are still gaining VS the dollar, and some have stalled out. for they need the Big Dog, euro, to run with them, and like I said above, the euro stalled out just above 1.31.The A$ blew right through its 200-day moving avg yesterday, and touched $1.04 this morning. The latest push coming from economic news coming out of China. I told you yesterday, that China’s 3rd QTR GDP was due to print, and print it did! The Chinese economy expanded 7.4% in the 3rd QTR VS a year ago. The consensus was for a 7.4% increase, but I was hoping for a little more as I told you I thought it would be around 7.8%…  (and it was +7.8% “Real GDP, whatever that is!) But that wasn’t all for China.Chinese Industrial Production, and Retail Sales also printed strong numbers for September, thus indicating that China’s economy has turned the corner on its Gov’t generated slowdown. If you’re keeping score at home, Chinese Industrial Production gained 10% in September, and Retail Sales grew at a 14.2% clip. Now that’s strong! And if you only want to believe ½ of what the Chinese report, the 7.1% increase in Retail Sales is still cooking with gas!So. the risk sentiment is strong. except with Gold & Silver. These two have been left behind at the station, and the Love Train carrying the currencies has departed. This improved risk sentiment, is not playing well with the U.S. Treasury yields. The 10-year Treasury’s yield has risen to 1.80%…  (just a couple of weeks ago it was 1.64%)  and remember, when the yield rises in a bond, the bond’s price goes down.  But we’ve seen these moves higher in yields before, and every time, the Fed steps in and squelches any attempt to take yields even higher.  The bond markets used to be able to direct yields. But with the Fed buying as much as they can these days, remember they participated in 61% of the Treasury auctions last year, there’s not much the bond markets can do. Although I would still love to see them try!In Sweden overnight. an article in a Swedish newspaper, really threw cold water on the markets’ thoughts that the next move in rates would be down.  Sweden’s Central Bank, The Riksbank, and the Riksbank Gov. Ingves was in the news. In and interview for the newspaper, Ingves warned that household and corporate indebtedness must be considered when setting rates.  These words were like a dagger in the heart of the rate cut campers, and the Swedish krona rallied!  The Riksbank meets next week, and I would bet a dollar to a Krispy Kreme that the Riksbank would leave rates unchanged at that meeting.  That would be good for the krona. But remember, the krona, the Norwegian krone, and Danish krone, all need the euro to push against the dollar for these to move higher. For now that is. I keep telling you time and time again that one day, the markets will wake up and smell the coffee. the coffee that says these countries fundamentals are not Greece, Portugal, and so on.  But until then, they get tarred with the same brush as the euro.Remember yesterday when I was talking about the Canadian dollar / loonie and saying that the fundamentals there continue to be strong, and that’s why the markets keep the loonie above parity, even though the Canadian Gov’t and Central Bank don’t like it one iota?   Well. more strong data has printed in Canada.  Take Canadian Manufacturing, was rose at a faster than expected clip of 1.5% in August.   And then here’s something that the Canadian Gov’t and Central Bank are going to have to stop and think about. Exports are up in Canada.  Even with the stronger than parity loonie! Look. let me set this straight for Mr. Carney (Bank of Canada Gov.).  if you have items/ stuff, that other countries demand, the price of your currency isn’t the “all-in” of everything that goes into the valuing of the export.  You can ask the Germans about this. Yes, they would love to see the euro around 1.20. But, when you make things of value, and they are in demand throughout the world, you can live with a stronger currency. There’s no need to go jimmying the currency’s value lower so your exports can be more competitive.  this goes out to all the other Central Bankers that are trying this debase your currency so exports are more competitive game. HEY! Make something of value, and you don’t have to jimmy the price of the currency lower!The news out of the Eurozone continues to have a calming effect. But an article in the Financial Times (FT) just might begin to stir things up. The FT reported that “plans to create a single euro area banking supervisor (the European Central Bank / ECB) are illegal. The FT claims that they obtained a secret legal opinion for the European Union Finance Ministers.  I would say that this probably has a lot to do with the stalling out of the euro this morning.I think, as we go along here, that there will many of these seemingly setbacks. But, as long as the Eurozone Leaders keep their heads down, and keep working toward a resolution of their debt problems and bond yield problems, that things on the “other side of all this” will be better.At least they are trying something! And maybe they’ll be wrong, and have to go back to square one, but at least they tried! Here in the U.S. it’s just carry on and keep piling up debt.   I know you all are tired of hearing me harp on about our ever-increasing debt. But, unless someone does something about it, we have to keep this in our sights, so we aren’t standing there holding the bag, when the you know what hits the fan!And with that. my TTWS story today is from our former General Accounting Head, David Walker, who has taken his thoughts across the country, and put them in a book. But, just for you, dear reader, we’ll have David Walker talk to us today. So, let’s go to the Big Finish!Then There Was This. from Moneynews.com.  “The overwhelming majority of Americans feel fiscal reform should take priority this election season, though few expect it to happen, said David Walker, former Comptroller General of the United States and current CEO of the Comeback America Initiative, which promotes fiscal reform and responsibility.Walker recently concluded a “$10 Million a Minute Tour” bus tour, named after the speed at which unfunded promises are climbing, and reached out to Americans in 16 states and the District of Columbia to convey to largely undecided voters issues surrounding fiscal reform in the country.“We found out 97 percent of the people we interacted believe our fiscal challenge is a major challenge and should be a top priority for the presidential candidates as well as other candidates for office, yet only 8 percent have confidence in their ability to work together to get something done in 2013,”“Eighty-five percent believe that it’s going to take a combination of spending reductions and additional revenues to get the job done. We talked about reforms in eight different areas, including social insurance programs, taxes, defense, budget controls, political reforms – the minimum support we got for the reforms was 77 percent.”Chuck again. OK. so more people in the country are realizing that going from $15 Trillion in debt to $16 Trillion in just 10 months is getting out of hand.  But, I have to think that those calling for spending reforms, are not the ones receiving the payouts from the Gov’t.  And then the biggest thing here is the question. “will lawmakers listen to the voters?”  I doubt it. but there’s always a chance, right?To recap. The currency rally continued throughout the day Wednesday, and in the overnight markets, but left some currencies behind, as their respective rallies stalled out. The euro stalled out, probably on a story in the FT about a plan to give the ECB more power is illegal. Canada continues to print strong economic data, in spite of a stronger than parity loonie, and the A$ rallied back to $1.04 overnight, before giving up some of that gain this morning, probably on profit taking.Currencies Today 10/18/12. American Style: A$ $1.0385, kiwi .8210, C$ $1.0220, euro 1.3105, sterling 1.6135, Swiss $1.0840, . European Style: rand 8.6365, krone 5.6210, SEK 6.5365, forint 211.60, zloty 3.1345, koruna 18.8765, RUB 30.75, yen 78.35, sing 1.2175, HKD 7.7505, INR 53.41, China 6.2460, pesos 12.80, BRL 2.0305, Dollar Index 79.14, Oil $92.15, 10-year 1.80%, Silver $33, and Gold. $1,742.85That’s it for today. I was startled this morning, as I arrived at the office, I turned on the lights, and voice said, “Good morning, Chuck” Whoa! I’m always here by myself in the morning! But one of our Wealth Mgt. gurus, Joseph, was here working, and startled the heck out of me! Whoa! My heart can’t handle that stuff! HA!  So, our Big hitter, goes out of the game in the first inning, and the guy that replaces him hits the game winning 2-run home run! He crushed it! Talk about a good replacement! The Cardinals rarely beat S.F’s Matt Cain, so that was a good game. My dad told me years ago, that in these series, the odd games are the most important. and we have won both odd games so far.  Well, I made up the time in the air, and got you to your destination on time, but, now we have to wait for a gate to open up! HA!  I hope you have a Tub Thumpin’ Thursday. I need to go back to sleep!Chuck Butler President EverBank World Markets 1-800-926-4922 www.everbank.comlast_img

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