More Tough Talk!
"I don't think Big Al will give us any direction whatsoever! And as long as the 'measured' wording remains in his statement, the dollar will continue to hold the hammer. When the Fed will slowdown is anybody's guess at this point."
by Chuck Butler In This Issue… - FOMC Week…
- German Business Confidence turns around!
- An end to Mexican rate hikes?
- A Birthday Breakfast in store!
--- Advertisement --- Seek stock market-driven yields with the confidence of 100% principal protection! The MarketSafe(SM) Certificate of Deposit from EverBank® offers earnings that are tied to the upside potential of the S&P 500. The CD also guarantees the return of all of your original investment at maturity regardless of how the S&P 500 performs over the term of your CD. With no account fees and FDIC insurance up to $100,000, the MarketSafe CD is a safe, low-cost savings alternative that gives you 100% principal protection and the potential to participate in strong stock market returns. Get the MarketSafe CD today! Click here to learn more and apply: http://www.everbank.com/main.asp?idpage=pro_mscd&affid=eb&referID=11600 --------------------- And now…today's Pfennig! More Tough Talk! Good day. Well, I hope your weekend was grand. It stifling hot here, but that didn't stop me from being outside, which is where you belong in the summertime! The sun's heat didn't do much to heat up the currencies though, as the dollar continues to hold the hammer. The euro has perked up a bit though overnight, so we'll have to see where that takes us today. We'll have a short trading week, this week and next, due to the Fourth of July holiday weekend. Friday, liquidity will dry up early in the day, as the "boys" head to the Hamptons! We'll also see another rate hike from the Fed on June 30th, but the thing to look for is the wording of the statement afterward. There are two camps on this right now…one camp says Big Al will soften his tone…and the other camp says he will sound even more hawkish. Me? I'm in neither camp, because I don't think Big Al will give us any direction whatsoever! And as long as the "measured" wording remains in his statement, the dollar will continue to hold the hammer. You know, if you've paid attention in class that I have been out there on the limb thinking the Fed is going to slowdown on these rate hikes. The economic data that has come through for over a month now, does not warrant further rate hikes. But when the Fed will slowdown is anybody's guess right now. So, it looks like I'll be out there on that limb for a while yet… Speaking of data, Friday, we saw Durable Goods Orders shoot up 5.5%. Immediately, I said to the guys on the desk…there had to be some huge aircraft orders in that number. And I was as right as rain, when the dust settled the data had been padded with the sale of 200 Boeing orders vs. 5 the previous month. So, let's go to the ex-trans number. Ex-Trans fell .2%, marking this the second consecutive month of falling orders. Hmmmm…the dollar gyrated on this data at first, then finally softened as the day went on. Well, as I said above, the euro has found some perk overnight, as two things have happened… First, Business Confidence rose for the first time in five months. This got the euro started…then…Yves Mersch, a voting ECB member, said in an interview that the "benchmark rate of 2% is appropriate for the foreseeable future." Then, Lorenzo Biji Smaghi, who also votes, said, "a cut may be harmful." So…we got the "more tough talk" that MarketWatch said I was looking for last week! I think this tough talk to be very important, especially coming from ECB members that you don't usually hear from. It shows the markets that the ECB is providing price stability even in the face of slow growth. They will not allow inflation that could easily begin to soar with oil prices above $60, to creep into their economy. Something should be said for that type of credibility…but right now, the ECB is only getting backslaps from me. The rest of the world thinks they are about to dissolve, and become history…someday, the rest of the world will get back on my bandwagon…someday… Don't look now, but the U.S. 10-year Treasury yield is back to 3.90%…after a brief time above the 4% level, the 10-year continues to push the envelope on lower long-term rates. I think a ton of this bond buying is now being fueled by sales of stocks. The stock market has been taking it on the chin lately, so as what happens and what has happened for hundreds of years…when stockowners get scared and sell…they buy Bonds! I don't think though that the Fed is none too happy about these low rates. How in the heck is the U.S. going to attract foreign investment, if the stock market is doing the rope a dope, and bond yields are low? The euro is 1/2 cent higher right now than when I came in this morning…the perkiness continues! YAHOO! Well, June is almost over, and guess which currency has outperformed all major currencies in June? The loonie. WOW! The rest of the lot have had a hard row to hoe this month vs. the dollar…but the loonie holds that distinction. So, two cheers for the loonie! It certainly looks like the loonie can continue to move vs. the dollar too! I would say it's about time, given the performance of the loonie this year! Recall, about a month ago, when I talked to you about Mexican pesos, and gave you the history lesson and all that? Basically, in a nutshell, I said interest rates needed to go higher before I would think about buying pesos. Well, last week the Mexican government issued a statement that inflation had fallen along with their Trade Deficit. The thing that caught my eye is the falling inflation. Hey folks…if inflation is falling, interest rates no longer need to be raised. And that might be bad for the peso. Be careful there… This week we'll see some economic data that should give the Fed some additional fodder for their statement. Coming up first is Consumer Confidence tomorrow, which is expected to rise. Why? I have no idea, I'm not Confident! Then on Wednesday we'll see the Dynamic Duo of Personal Income and Spending, which gets me going every month, that I see us spending more than we make! Then on Thursday, we'll get the FOMC rate announcement. And to end the week, we'll get the ISM Manufacturing Index, which, if you recall, has been falling toward the 50 mark, which is the line of demarcation between contraction and expansion. Recall, I told you last month when the index fell to 51.5 that the Fed has never raised interest rates when the index was below 50. This Friday's data will hold the key to when the Fed slows down, if history has anything to say about it! Currencies today: A$ .77, kiwi .71, C$ .81, euro 1.2185, sterling 1.8310, Swiss .79, rand 6.66, krone 6.52, forint 203.37, zloty 3.32, koruna 24.60, yen 109.25, baht 41.10, sing 1.675, pesos 10.77, and gold… $439.60 That's it for today. Chris will bring you the Pfennig tomorrow, as it will be my little buddy's 10th birthday, and we have a tradition of going to breakfast together on his birthday. I wonder if he'll still want to do that when he's 15? Hard to believe Alex is going to be 10, I remember when he used to sit on my lap and help me write the Pfennig. (when I did it from home)12078ljds93(#(#)(… That's what it used to look like! HAHAHA! Have a great Monday and week, and try to keep cool! |
