Chuck Butler

After reaching a high of nearly $106 on Wednesday, the price of oil has hit the slippery slope (yay!) all the way down to $101.27 this morning. While it will take a while before this ride on the slippery slope is seen at the gas pump, if ever, the psychological feeling it has for consumers is good. It won’t play well with the petrol currencies, like Norway, Canada, Russia, etc.

I’m going to get back to the price of oil in a bit here, but first, the currencies. They are still stuck in that rut we talked about yesterday — the underlying bias remains to buy dollars right now, but the bias is very weak folks, very weak.

It is a Jobs Jamboree Friday, and right now, the “experts” are saying that the Bureau of Labor Statistics (BLS) will show that 160,000 jobs were created in April. That’s quite a bit more than the ADP report showed us the day before (117,000), and looks pretty suspect when you also factor in the Challenger job cuts that printed yesterday and showed an 11% gain year on year for April.

The markets have recently kind of gone back to the old way of valuing the dollar with outcome of the jobs jamboree, which would mean 160,000 jobs created is not that good. Sure, it’s better than the 120,000 jobs that were allegedly created in March. But at this rate, jobs aren’t even keeping up with the population. Remember, I told you long ago that about 250,000 jobs need to be created on a monthly basis to fuel a recovering economy — 160,000 is not 250,000.

But the markets will get lathered up a bit, should the report print around 160,000, and the knuckleheads that see it as good will mark up the dollar. The calmer heads that see it for what it is will not mark up the dollar. At the end of the day, we’ll see who won.

Basically, I see it like this. We all know the BLS “adjusts” the numbers to look better than they are, but take the BLS number as it is — for that’s what the markets do — and look at it this morning with this in mind: A strong number for April would wipe out the negativity that surrounded the March weak number of 120,000 and prove that it was only a bump in the road, thus removing thoughts about QE3.

But if the number is weak, making two consecutive months of weak reports, the calls for QE3 will be deafening, and that would be dollar negative, and gold positive.

Of course, if the number of jobs created per the BLS is strong, that would be dollar positive.

The euro (EUR) is also being held hostage this morning, as Europe heads into the weekend with two major elections to take place. France will choose a new president, probably Hollande, who is not Sarkozy and not a fan of the great plan for the eurozone. Greece will vote in a new government. Then in minor elections, both Germany and Italy will have regional elections.

Everyone knows what to expect from Hollande, so his win, while not good for the euro, won’t hurt it too much, as a Hollande victory has already been priced into the euro. The Greece government election is a real wild card, and is putting the most pressure on the euro this morning. My thought is that this will turn out to be a tempest in a teapot.

The fun just keeps coming for the Australian dollar (AUD)… NOT! First, the Reserve Bank of Australia (RBA) delivered a powerful blow to the midsection of the A$ by cutting rates 50 basis points, when 25 basis points were expected, and now the RBA has moved up the A$’s body and is slapping it in the face. The RBA lowered its growth forecasts across the forecast horizon, which is central bank parlance for as far as we can see, economic growth will be weaker…

So make a notation right here, right now, that the RBA is going to cut rates another 50 basis points (1/2%) later this year…

Gold is selling off again. This morning, the shiny metal is down $5. I did an interview with Dow Jones yesterday and I talked a lot about gold and how I truly believe that the push down that we’ve seen in the price of gold has been government orchestrated, going back to the WikiLeaks cable I told you about. The U.S. can’t have everyone replacing dollars with gold. It’s that simple, folks. And one day, sons and daughters, you will find out the truth, and you’ll be able to tell your grandkids that you knew the guy that first talked about that.

And the price of oil might have slipped some this week, but it hasn’t stopped Norway from posting some very impressive profit numbers this year. Norway, the world’s seventh-largest oil exporter, will probably raise its oil price estimate by 13% when it publishes its budget on May 15.

I promised that I would get back to the price of oil. Let me set this up. Twice this week, I talked about the call that was made at the Casey conference for $40 oil in the next year. And while I believe as a country we should be able to achieve that, I believed that the government, the EPA and other things would be stumbling blocks.

I saw this last night in The Wall Street Journal: “The Obama administration will soon issue new environmental-safety rules hydraulic fracturing on federal land, setting a new standard that natural gas wells on all lands eventually could follow.

“The rules, which are likely to be unveiled by the Interior Department within days, are designed to address concerns that the method of extracting natural gas known as ‘fracking’ can contaminate groundwater. Among other things, they create new guidelines for constructing wells and treating waste water, according to a draft of the proposed rules reviewed by The Wall Street Journal.”

Chuck again. So see, the government’s hand is already entering the oil cookie jar.

Then from The Daily Reckoning, my friend, the one and only Bill Bonner:

“In Europe, the following countries are now in recession:

Slovenia
Italy
Czech Republic
Ireland
Greece
Denmark
Portugal
Netherlands
Belgium
U.K.
Spain

“In America, the last reported GDP results were positive. But take out inventory buildups and the growth rate was only 1.6%. Not very exciting. Almost every report in the financial press said the results were ‘disappointing.’ But why would they be disappointed? Don’t they know we’re in a Great Correction? They’re lucky there was any growth at all. And if you took out all the stimulus spending, ZIRP, LTRO, TARP, QE 1, QE 2, Operation Twist and all the increases in disability…and other transfer payments…

“…what do you have?

“Most likely, you’d be in the same situation as the U.K., Spain and all the other recessed economies.”

Chuck again… no one can say it like Bill does…

To recap: It’s a Jobs Jamboree Friday, and the currencies’ near-term direction could very well come from the outcome of the jobs data. The currencies this morning remain in a rut, with a weak bias to buy dollars. The euro is being held hostage by elections that will take place this weekend in the eurozone. And gold continues to be pushed down, but by whom?

Chuck Butler
for The Daily Reckoning

Chuck Butler

Chuck Butler is President of EverBank

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