A Not So Wild Ride…
"The move they made on Thursday was a baby step, and if currency traders will just accept it as such, and start focusing on the floating currencies in Asia, we can stop all this teeth gnashing over when the next adjustment will come…"
by Chuck Butler In This Issue… - A Not So Wild Ride…
- Chicken Littles…. UGH!
- Loonie pauses for the cause…
- No Rate Cut in N.Z.
--- Advertisement --- Need more World Market deposit slips? Simply give us a call at 800.926.4922, or e-mail worldmarkets@everbank.com. We'll be happy to send you more Bank-By-Mail envelopes by return mail. --------------------- And now…today's Pfennig! A Not So Wild Ride… Good day. Well, this is the last week of Pfennigs for me till the middle of August, as first I go on summer vacation, and then head to Vancouver for the Agora Wealth Symposium. So, I'll belt out the Pfennig this week, and then hand the con over to Chris! The first day of real trading with a new renminbi currency policy wasn't exactly a wild ride on Friday. China put the renminbi / dollar rate at 8.1111, just a touch weaker than the first fixing, and immediately led to the Chicken Littles crying about the Chinese holding back, and limiting currency gains. What a bunch of dolts! Look…the move they made on Thursday was a baby step, and we'll have to deal with it as such. BUT! It was a step! And one in the right direction. So, if currency traders will just accept it as such, and start focusing on the floating currencies in Asia we can stop all this teeth gnashing over when the next adjustment will come… And like I said on Friday, the best way for the renminbi to gain vs. the dollar is for the Asian currencies that make up the basket to gain vs. the dollar, and things will become much clearer. Oh, and mark your calendars…China's President Hu is expected to visit the U.S. in September. You don't think he would have a second currency adjustment in his pocket to deliver to the White House when he visits, do you? Nah…well…maybe… I saw a report this morning that Yen traders are more confident about the yen moving higher vs. the dollar and euro now that China has changed their currency policy. That makes sense, now lets see you guys start to take down positions in yen to support it! In other news…the euro gave back some of its gains from Thursday, but has spent the overnight session climbing back to the 1.2070 range. There are some confidence reports due from Germany, Italy and France this week, that I suspect will be improved given the weaker euro, and the fact that we're beginning to put that one hundred miles of desert between the current trading and the constitution votes… German inflation has ticked higher, which means there will be no rate cut from the ECB. In fact, the talk about a rate cut has dwindled to just a few that remain steadfast that the ECB will cut rates. I was in that camp last spring, but have changed horses in the middle of the stream. No rate cut talk should provide the euro some strength… I see copper has hit another record high in London trading, as a strike by the workers of the second-largest copper producer is cutting the supply, and with demand from China so strong. Well, you know what they taught us in economics about supply and demand…base metals strength is a great underpin for the Aussie dollar. That run the loonie was on earlier this month has cooled its heels for now, which is a great pause for the cause in my opinion. We didn't want it to run away from us before buyers got a chance to buy at a relatively cheap price…the Central Bank governor Dodge, is still talking like a hawk, and therefore I expect a rate hike at the next Central Bank meeting, which should really give the loonie some needed fuel to make its next run. The data cupboard has some reports this week, but nothing that will make the markets do back flips! We will see Consumer Confidence tomorrow, and once again it's supposed to show an improvement. I guess the people they surveyed didn't hold jobs at HP, or Eastman Kodak, or any of the other Companies that have announced massive layoffs in the past couple of weeks! We'll also see the 2nd QTR GDP, which is expected to come in around 3.5%. There will be others, but I'll talk about them when they are ready to print. Other than that we're going to be heading to the Dog Days of August, when currency traders around the world go on vacation, and volume goes to the dogs. The Reserve Bank of New Zealand will meet this week, and with inflation running around 2.8%, I wouldn't put any fliers out for a rate cut! No, as I've explained before… The Central Bank Gov. Bollard in this case, has a mandate to keep inflation between 1 and 3%. So, with domestic demand still strong…rtes in New Zealand will remain the highest of any industrialized country in the world! That should be good news for kiwi! Currencies today: A$ .7610, kiwi .6825, C$ .8215, euro 1.2080, sterling 1.7390, Swiss .7725, rand 6.66, krone 6.56, forint 203.34, zloty 3.40, koruna 24.90, yen 111.80, baht 41.45, sing 1.6650, pesos 10.65, and gold… $425.20 That's it for today. Shorter than usual again today, just not a lot to talk about and it will just get worse as we head to August! In fact, I should just hand the con over to Chris right now! Had a great time with my little buddy at Friday night's Cardinals game. I sure wish it would cool down a bit, the heat is really tough on someone that likes to be outside like me! Have a great Monday and week! | 
