09/09/10 St. Louis, Missouri – Well… I love it when a plan comes together! I told you months ago, that the markets had given up on a rate hike from the Bank of Canada (BOC) at their 9/8 meeting… I took a different road, and said they would still hike rates… I was alone on this one folks, but… Guess what? The BOC hiked rates 25 BPS (1/4%) yesterday! I had thought they BOC would hike rates but attempt to water the hike down with dovish tones… Here’s the BOC statement, you decide if they sound dovish or not…
“Any further reduction in monetary policy stimulus would need to be carefully considered in light of the unusual uncertainty surrounding the outlook.”
The Canadian dollar/loonie (CAD) rallied very nicely after the rate announcement, and the lack of “talking down” the loonie by the BOC…
The Aussie dollar (AUD) rallied nicely overnight, on the news that more jobs were created in July than forecast… Recall that yesterday I said the number of jobs created would exceed the forecasts, and they did… Not as large a difference as I said, but still, more than forecast! 30,000 and change jobs were created, versus the forecast of 25,000…
The reason this report put some wind in the Aussie dollar’s sails is that, for the most part, the markets were resigned to thinking that the rate hikes from the Reserve Bank of Australia (RBA) were over for 2010. This report brings back the question in their minds of whether or not the RBA will or won’t hike rates again this year.
Another commodity currency is in the news this morning but for a different reason… Norway has announced that they are buying Greek government bonds, as they do not believe that Greece will default on them. So… First Norway funds a retirement for every citizen, then they create a fund for all unborn citizens to come, and then this… Buying Greek bonds… I think they are very shrewd investors, and this just may be a coupe for them in the future… And it helps Greece!
The Bank of England (BOE) is meeting as I type, but there’s nothing here to look at, move along…
And just when you thought that (well maybe), the euro (EUR) might be able to step around the problems with the banks being undercapitalized… European Central Bank (ECB) Executive Board Member, Stark, came out and made comments about the banks needing more capital…
So… Before it was the FT, and other sources making these claims about European banks, now it’s one of the ECB’s big boys saying it… I don’t think the euro gets to side step this!
However… It has to be intriguing to traders, etc. that Norway has stepped up to the plate for Greece… That maybe the euro can hold on and kick the can further down the road, for every time they do, something happens to ease the pain the euro has suffered this year.
Yesterday, was a good day… It’s after midnight and I’ve got you on my mind! I’m talking about gold and silver here… Yesterday it looked like gold just might climb back to its all-time high, and silver to levels it hadn’t seen in some time… But in the overnight markets, there must have been some profit taking, for both of these metals have backed off their lofty prices of yesterday. To me, it has to be profit taking, because there would be no other reason to sell gold and silver right now… There’s just too much uncertainty in the world!
Today, being a Thursday, we’ll get the Weekly Initial Jobless Claims, which should remain around 470,000… We’ll also see the color of the latest trade deficit. The “experts” have forecast a decline in the trade deficit from $49.9 billion in June to $46.8 billion in July… I’m not that convinced that the trade deficit drops by that much…
Then there was this… From The Washington Post…
Most Americans say the planned Muslim community center and place of worship should not be built in Lower Manhattan, with the sensitive locale being their overwhelming objection, according to a new Washington Post-ABC News poll.
I guess we shouldn’t get our hopes up that just because the majority of Americans don’t want something, that we don’t get it… Remember Health Care? The majority of Americans didn’t want it, but got it any way… Of course, I’m sure that in the mid-term elections coming up in November, those who voted for it, when their constituents said no, are going to hear about it…
To recap… The Bank of Canada DID raise rates and DID NOT talk down the loonie… And Australia posted a strong jobs number for July… The commodity currencies have rallied on these two pieces of data… Gold and silver were humming along quite nicely too yesterday, but have run into some profit taking overnight. And… Norway is going to spend some of their massive reserves on Greek bonds…
Chuck Butler
for The Daily Reckoning
Chuck Butler
Chuck Butler is President of EverBank® World Markets and the author of the popular Daily Pfennig newsletter, which is reposted here at The Daily Reckoning. With a career in investment services and currencies extending over 35 years, Mr. Butler oversees all aspects of customer service and the trading desk for EverBank World Markets. A respected analyst of the currency market, Mr. Butler has frequently made appearances or been quoted by the national media. These include the Wall Street Journal, US News and World Report, MarketWatch, USAToday, CNNfn, Bloomberg TV, CNBC, and the Chicago Tribune. Mr. Butler was previously the Chief International Bond Trader and Director of Risk Management for Mark Twain Bank, and has held significant positions in the investment industry since 1973.
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