Data Week!
"On Wednesday, we'll see the October trade deficit, which is expected to drop from September's whopping $66.1 billion, but remain above $60 billion! Thursday will bring us CPI, which will highlight my tirade above. Consumer inflation is expected to fall!"
By Chuck Butler In this issue… - A nice recovery.
- Gold soars…too fast?
- FOMC tomorrow.
- Commodities lead Aussie higher!
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Click here to open your new MarketSafe Gold Bullion CD today! --------------------- And now…today's Pfennig! Data Week! Good day. Well, I trust your weekend was grand. I went on a "family shopping extravaganza" on Saturday night. I'll say this, the mall was full of people, but didn't see a whole lot of "buying" going on, except from the crowd that was with me! The point is, unless I was missing something, the holiday shopping season might just be so-so. The currencies had a decent day on Friday, even with the monstrous up-tick in consumer confidence, as measure by the University of Michigan. I think the markets are slowly coming around to the Chuck Butler way of thinking through this mess. That is to say, the Fed is nearing the end of their rate hikes (even though there are probably two more bullets left in the Fed's interest rate hike chamber) and that a return to overall fundamentals will take place in 2006. Then again, I've been fooled before, and there have been many false dawns. Yes, the Fed will lift interest rates to 4.25% this week, but the markets are looking past that move, and focusing on the wording of the statement. The word on the street is that most Fed observers are thinking that the word "accommodative" will be changed, which will really open up Pandora's box of debate regarding how long the Fed will continue to raise rates. Now, last week, someone sent me an e-mail and said, "Chuck, you keep saying inflation is out of hand, but yet you're calling for an end to the rate hikes." Ahhh, grasshopper, I make my call on rates based on what the government keeps telling us with the monthly reports: there is little or no inflation. How can the Fed continue to say they are fighting inflation with rate hikes, when the government tells us there isn't any inflation? So, deep down in my heart, I know inflation is out there, and getting stronger all the time, but if the government wants to play this game, then they can't have their cake and eat it, too! Of course, the Fed is independent of the government - wink, wink. So, they theoretically could do whatever they wanted. OK, enough of that. We've got so much data this week to plow through, starting today. Yes, right out of the starters blocks, we'll see the November monthly budget statement, which is expected to rise to $80 billion. OUCH! Tomorrow, we'll see retail sales, which according to the BHI (The Butler Household Index) will rebound a bit on the holiday shopping after Thanksgiving. On Wednesday, we'll see the October trade deficit, which is expected to drop from September's whopping $66.1 billion, but remain above $60 billion! Thursday will bring us CPI, which will highlight my tirade above. Consumer inflation is expected to fall! We'll also see the net foreign security purchases on Thursday, along with industrial production and capacity utilization. On Friday, my last day until after Christmas, the third quarter current account deficit, will show us just how deep in dookie we are with our deficits. Whew! That's a lot o' data to get through this week! It should leave us all wondering, how the dollar has remained well bid all year! Of course, we know the HIA repatriation of the dollar has had a lot to do with it, and that's about to end. We also know that rising interest rates had a lot to do with it, and that too is about to end. Well, just when you thought it was safe to get back into the water, the Mexican Central Bank surprised the markets with a 50 BPS rate cut on Friday afternoon. The decision followed Thursday's consumer price report showing annual inflation falling to a record low of 2.91%, meeting the central bank's 3% target for the first time. The peso dropped about 2% on the news, and reinforces my claim that investors in pesos need a "risk premium" and that "risk premium" is getting whacked! Under the heading of "getting caught up in hysteria," the price of gold shot up to $537.50 in the London fixing this morning. From there, the markets have taken it even higher to $539! I'm somewhat concerned with the speed in which gold has moved higher recently. It reminds me of the year-end move by the euro last year, when trading in the currency just got completely out of hand. Not that I didn't expect the price of gold to go higher, I'm just concerned with the speed at this time. Slow down; you move too fast. You've got to make the morning last. Just kicking round, the cobblestones. Look at the fun in feeling groovy. The surge in gold, and industrial metals prices has put wind in the sails of Australia once more, and has led the Australian government to increase their forecast for commodity export earnings, with commodity export earnings contributing more than 10% to economic growth in Australia. This is a very good thing for the Aussie dollar! Once again, it looks like the markets have forgotten, for the moment, about New Zealand's current account deficit, and are focused on the yield differential. Kiwi has rebounded from last week's sell off. Our recent addition to the currency roster, Iceland, really bounced back on Friday, following the euro. This morning, Iceland printed a recent CPI report that showed higher consumer costs, which will once again put pressure on the Sedlabanki (their central bank) to raise rates, yet again. Just a note on Iceland, as I've received some e-mails asking about the country: Iceland has the Nordic region's fastest-growing economy, Europe's lowest jobless rate, and a central bank that is doing its best to fight inflation, which should all be good things for the economy. The thing I keep mentioning to people though, is this is a very small economy, and country, population wise, so markets can get a little thin. However, there's a lot of interest in Iceland right now, so I expect good things. Before I head to the big finish, I want to say that even with a Fed meeting tomorrow, I'm expecting the dollar to begin a year-end slide. I think the euro will end the year above 1.20, having formed a nice base for future gains in 2006. With all the data this week, it could be very interesting, as it is also the last "real" week of trading for the year. Next week, vacations kick in, and slowly the junior people will man the currency desks, as we head toward Christmas, and then New Years. Currencies today: A$ .7520, kiwi .7080, C$ .8675, euro 1.1883, sterling 1.7645, Swiss .77, ISK 63.30, rand 6.35, krone 6.6950, forint 214.52, zloty 3.23, koruna 24.40, yen 120.50, baht 41.22, sing 1.6820, China 8.077, pesos 10.64, and gold $539.00. That's it for today. The weather warmed up a bit here, which works out well for me! You can keep that bitter cold weather up in Canada! A very poor showing by the Rams yesterday, made me check the schedules for spring training! Everyone is writing my Cardinals off for next year because they haven't signed any free agents. I say: we'll see. Have a great Monday and data-filled week! |
