Lots O' Data This Week
"So the sour note that I thought the currencies could end the week on was swept under a rug, and instead the currencies rallied! The euro made it within spittin' distance of 1.32 before it settled in, closing up almost three quarters of a cent at 1.3175!"
by Chuck Butler In This Issue… - Fed-Speak Friday was a dud!
- Confirming Diversification by Central Banks…
- Singapore dollar hits a 9-year high!
- Oil greases the tracks for Gold…
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And Fed Head Yellen repeated a speech she made previously only a few days earlier. So, the sour note that I thought the currencies could end the week on was swept under a rug, and instead the currencies rallied! The euro made it within spittin' distance of 1.32 before it settled in, closing up almost three quarters of a cent at 1.3175! In the overnight market, there has been some profit taking, but not much. We'll see some data from the Eurozone this week that should keep the fire lit under the European Central Bank (ECB) to keep the rate hike cycle in gear. We'll see German and French unemployment data tomorrow, and Eurozone CPI on Wednesday. German retail sales will close the week on Friday. Eurozone CPI is likely to come in a shade below the ceiling target set by the ECB of 2%. But, as I keep harping on… This isn't enough to make the ECB back off the rate hike trigger. Money supply is still running way too high in the Eurozone… And after our little classroom project in Friday's Pfennig where we proved that money supply is the root of all inflation, there should be no doubt that the ECB will hike rates when they meet next week. Last week I printed some thoughts from one of my fave economists, Stephen Roach, on the very weak TIC data. Well, to follow that up, the Royal Bank of Scotland (RBS) did a survey to prove that Central Banks are diversifying a portion of their reserves out of dollars. According to RBS, Italy, Russia, Sweden and Switzerland have made their "major adjustments", favoring the euro and pound sterling to take the place of dollars. Of course we all know that the Big Dogs regarding reserve diversification are China and Japan… And while China has repeatedly said they would diversify their trillion dollars worth of reserves, they have done little to nothing. And while I believe that Central Bank diversification is a BIG DEAL for the future value of the dollar, let's not forget private sector investment. It's not all about the Central Banks! Foreign private investors have been switching from equities to higher yielding investments, but once they have been saturated with those, they will look to other high yielding countries, which again adds tons of weight for the dollar to carry around. The price of oil broke above $61 on Friday, and is on terra firma now above that figure. Uh-oh… Looks like U.S. inventories were lower. This move up by oil helped grease the tracks for gold to add to its phenomenal performance last week. Gold is trading above $685, and certainly looks as though it wants to do a Sly Stone, and go higher! As I mentioned last week, when gold performs well, it plays well with currency performances of South African rands, and Aussie dollars. And so… Both of these currencies have seen good performances recently. The Aussie dollar has really moved stronger and looks like it has 80-cents in its sights once again! Across the Tasman from Australia is New Zealand, and here, the currency continues to benefit from being on the investment side of the carry trade. But there's more… The domestic demand continues to warrant the high interest rates, and even keep the thought that rates could go higher on tap. The latest business confidence report from New Zealand, is adding to those thoughts of higher rates, as it moved higher last month. I don't see good things for kiwi once the carry trade is unwound, but at this point, who knows when that will happen? So… As long as that ship is out to sea, you might as well play in the harbor! The Singapore dollar hit a nine-year high last night versus the dollar! WOW! This in the face of a day when the Chinese renminbi lost ground! You have to love it when a plan comes together! And in case you're wondering what I'm talking about… Roughly two years ago, I began talking about the Asian currencies. (Shoot, it's probably closer to three years ago)… Anyway, my point then was that the markets would grow tired of waiting for China to allow their currency to float, and begin marking up the currencies of Asia that did float… Japan, Thailand and Singapore. Well… Thailand and Singapore played the game. I should have realized that the Japanese yen doesn't "float", it's manipulated by the government just like the renminbi. Well… Things were sweet for Thailand before that government decided to put their hands in the cookie jar… So, we can't trade Thai baht any longer, except to get out of positions when they come due, and that leaves us… Drum roll please… Singapore! So, it's nice to see Singapore dollars pick up the flag! Here in the United States we begin to see some data again this week with durable goods leading off tomorrow, followed by consumer confidence, and existing home sales. Wednesday we'll see the color of the latest GDP for the fourth quarter… Here, I believe is where we'll see a major revision to the previous GDP report card that indicated the fourth quarter was clicking along nicely at 3.5%. Yes, I expect that 3.5% to be revised down at least one percentage point. Of course, if we were using "real inflation" this revision would be something to send the dollar to the woodshed. We'll have to see what the final revision is, but if it is bad, like I think it will be, the dollar will struggle this week. On Thursday, we'll see some of my faves - personal income and spending, which last year showed that U.S. consumers spent more than they made. Forget all that stuff about savings rates and so on, as there are a dozen ways from Sunday to figure "savings rates". The important thing to think about is this… If we spend more than we make, there are no savings, period! Not to bore you, but there's more data this week. ISM Manufacturing, and U. of Michigan Confidence will bring the week to a close. Chris Gaffney will be telling you about all of this, as I leave for South Florida on Wednesday morning! Currencies today: A$ .7924, kiwi .7088, C$ .8635, euro 1.3166, sterling 1.9640, Swiss .8120, ISK 65.75, rand 7.1050, krone 6.13, SEK 7.06, forint 192.45, zloty 2.96, koruna 21.60, yen 120.60, baht 33.78, sing 1.5285, HKD 7.8095, INR 44.20, China 7.75, pesos 11.06, dollar index 84.04, Silver $14.60, and Gold… $685.70 That's it for today… Looks like March is going to come in like a lion for us here in the Midwest this week. That's OK, it gives us something to look forward to when it turns to a lamb! I'll spend about half the month in Florida, so I've got that going for me! March also brings us the NCAA Basketball Championship Tournament, which for my money is some of the best stuff on TV! My beloved Missouri Tigers won't be going to the "big dance" as the tournament is called, so we have to wait until next year! We have a full desk today for the first time this year! Our little Christine is still on maternity leave, but Linda Lou has done a great job for us! Have a great Monday and week! | 
