Another Whippy Day!
"Greenspan said the outright fall in long rates despite the Fed's tightening action was a 'conundrum'…I'm not even your second to last choice as a Fed Chairman, but I know what's keeping long-term interest rates low, and so does he!"
by Chuck Butler In This Issue… Whipsawed! Central Bank Intervention again… Big Al working on "conundrums"! Two Shining Stars keep going
--- 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! Another Whippy Day! Good day. Well, Big Al spoke, the currency markets got whipsawed, and we ended the day basically where we started it with the currency levels! Oh, there was about an hour of teeth gnashing when Big Al was spreading his "Greenspam," but calmer heads prevailed, and all was right on the night. Here's the skinny: Right after I signed off yesterday, the currencies started moving higher with headlines announcing that Syria and Iran would work together to fight "common enemies." Then came the news of an explosion near a nuclear facility in Iran -- there was speculation by Iran State TV that the explosion was the result of a missile fired from an unknown aircraft. This sent the euro soaring to the high for the day at 1.3065, but just as quickly as it ran up, it came back down when it was learned that the explosion was construction-related and had nothing to do with recent tensions between Iran, Syria and the United States. The euro then settled in around the 1.3020 figure going into Big Al's testimony. Then Big Al started stumbling, bumbling along with some hawkish statements regarding the economy, which led the rose colored glass wearers to read into his statement that the "measured pace" of rates hike is going to turn to an aggressive pace. The euro then headed to 1.2960, but put the brakes on there, and turned around again, when it was rumored that Central Banks began buying the single unit. Hmmm… I talked about this last week when it was rumored that Central Banks had begun buying the euro vs. the dollar. Now, once again the smoke has appeared. So, now I truly believe it's true, that the Central Banks of the world are fully aware of the imbalances going on, and are not going to sit idly by and watch the dollar get stronger making the mess even worse! Now, we've got individual investors and Central Banks buying the single unit. I will say that we all got a big laugh out of the story from Big Al's testimony that described our Fed Chairman as saying the outright fall in long rates despite the Fed's tightening action was a "conundrum" to him. Very odd, eh? Okay, I'm not even your second to last choice as a Fed Chairman, but I know what's keeping long-term interest rates low, and so does he! We keep issuing debt, and the Asian Central Banks keep buying it, and as long as there are buyers at the market rate, those long-term interest rates aren't going anywhere! But the funny thought here is that Big Al is sitting around with the other Fed heads working on conundrums! HAHAHA! So, we've walked through the TIC's data, and a Big Al testimony on the economy this week, and after all of it the euro is sitting about 2-cents higher than when we went home on Friday! And the euro's not the only one rallying this week! My two shining stars in the South Pacific, have really been putting on the Ritz this week. Aussie is trading around .7880, and kiwi around .7180! The top headline as I turned on the screens this morning says: "Dollar drops; Traders bet U.S. rate attraction insufficient to extend gain." That's right! In fact, the dollar should have never gained on rate attraction to begin with! Okay, I left you yesterday with a news flash that Japan had announced that their economy had slipped back into recession. I don't believe it for one minute, and put this down as "advanced jawboning" the yen weaker. Of course, my mind went flashing back to the mid 90's, when the yen hit it's all time record high vs. the dollar, and thought about how the times are very eerily similar. In the mid 90's, Japan was in the depths of their decade long funk, and that's when the yen was the strongest. And also keep in mind; in the mid 90's the Fed was in the middle of their 2-year interest rate hike campaign. So, I doubt this announcement by Jovial Japanese Jawboners will hurt the yen in the long run. Yes, yesterday it did, but that was just profit takers using the announcement as an excuse to take their profits! I still expect yen to be trading south of the 95 figure this year. The other data that came out yesterday was once again "soft"… Industrial Production was a big fat 0%, while Capacity Utilization remained at 79. I guess when Big Al said yesterday that the "economy has steadied" that's what he was talking about…with the word "steadied" meaning soft! Of course, he also said, "inflation was well-anchored." I wonder what the "aggressive rate hike campers" had to say about that statement? Today, we see the Weekly Initial Jobless Claims, which have a chance to fall below the 300k figure for the first time since before the Dead Sea was even sick! We'll also see the color of the Philly Fed Index, which is forecast to be much stronger this month. I don't know if I can get my arms around that thought. So, we'll have to see what it brings us around lunchtime. As I get ready to head to the Big Finish, I see the euro bumping up even higher to 1.3075. I think 1.31 is going to be a tough road to hoe for the euro, but it will eventually leave that figure in the far reaches of its rear view mirror! Currencies today: A$ .7880, kiwi .7190, C$ .8110, euro 1.3075, sterling 1.8915, Swiss .8450, rand 5.96, krone 6.40, forint 186.13, zloty 3.055, koruna 22.94, yen 105.30, baht 38.53, sing 1.6425, pesos 11.14, and gold… $427.42 That's it for today. The kind folks at CBS Market Watch called yesterday afternoon for my views on the Greenspan testimony. I'm sure they got more from me than they wanted! I see where the equipment truck has arrived at the Cardinals spring training facility in Jupiter, Fl. Won't be long now, and the crack of the bats and the pops of the glove will be heard… I CAN'T WAIT! Have a great Thursday! |
