A Continued Bias to Sell the U.S. Dollar

Good day… And a Thunderin’ Thursday to you! I’m absolutely shocked I was able to answer the bell this morning, so this will be short-n-sweet, as I’m working on borrowed time right now!

Well… No earth shattering announcements, research papers, or data yesterday, so the currencies were able to gain ground versus the dollar. Not much, but some… I would have to say that from my view in the cheap seats, there seems to have been a bias to sell dollars this week, ahead of the shortened week and long weekend. It will be Good Friday for those of us who observe that tomorrow, which means U.S. stocks will be closed, and a handful of countries close down to begin the Holiday, which will carry over for some countries on Easter Monday.

So… This is the last “full-day” of trading around the world, till next Tuesday. But, like I mentioned above, it certainly seems as though the bias this week, has been to sell dollars… But how long will that hang around? U.S. corporations begin, in earnest, to announce earnings next week, and in my opinion, this is going to be more “blood in the streets” which means I would like to see the currencies break their tie with stocks beforehand!

I see Japan is back to its old tricks, spending $150 billion worth of yen on their “next” stimulus package… Throwing good money at bad, that’s what I call all that stimulus stuff! Now, I was reading a report yesterday that talked about the U.S. “turning Japanese” because of all the government spending to deal with a recession, just like Japan did in the ’90s (it worked out well for them, eh?) Of course, long time readers of the Pfennig know that I’ve been making that comparison for quite a few years now. In fact, my old colleague, Chris Lissner, and I sat down in 2001, and began putting charts on tops of charts and yield curves on top of yield curves, showing the comparison of where the United States was headed… And that was a LONG TIME ago – way before the United States began spending trillions of taxpayer funds in an attempt to kick start the economy, and keep us from what they felt was a “financial disaster” on the horizon.

Have you seen the new word the press/media is using to describe bankers? They call them “banksters”… You know, like gangsters. I don’t know about you… But I feel that calling any of those bankers who got helped bring the financial sector to its knees “banksters” is probably doing a disservice to gangsters! HA!

Well… Recall about six months ago, there was all this talk in the markets about how China was going to “shut down” and how the renminbi (CNY) would not be allowed to gain versus the dollar? That’s all water under the bridge now. You see… As I’ve mentioned a couple of times now recently, it looks like China will be the first country to pull out of the global recession. I’m seeing more and more stories on the newswires that talk about buying renminbi once again… Very interesting…

This morning, the Bank of England (BOE) is meeting to discuss rates… Well, there’s not much left to discuss! The BOE has cut rates to 0.5% or 50 BPS… But, just like the U.S. Fed, this meeting follows the BOE’s quantitative easing announcement… So, you just never know what might be said here to move the pound sterling (GBP) either way…

Down Under… Australia saw consumer confidence rebound for the first time this year. Here’s the skinny… The Westpac-Melbourne Institute index of consumer sentiment rose 8.3% to 92.7 points, from 85.6 points in March.

However, the index remains below 100 points, signaling that pessimists are outweighing optimists for the 15th month in a row.

Westpac chief economist Bill Evans said the result was “surprisingly strong” and followed a month of more positive economic news and a rise in the Australian dollar (AUD) exchange rate and the stock market.

Just another brick in the wall… All in all, it’s just another, brick in the wall… OK, what am I talking about here? I’m just infusing some Pink Floyd into my recent thoughts that Australia “may” be turning the corner… I also received a note from a reader that was traveling in Australia. The reader mentioned that they are not seeing the financial panic there… So… Some news from a correspondent on the road!

Gold has had a tough couple of weeks, as the G20 gave everyone a warm and fuzzy, thus reducing gold’s appeal as a safe haven… But that should all change if the stocks earnings season leaves blood in the streets, as I suspect they will… The shiny metal is up $3 this morning, but holding onto those morning gains recently has been a challenge. But again, this scenario of “everything is beautiful” is about to end… Wink, wink…

The Fed’s FOMC meeting minutes printed yesterday. Recall, this was the meeting at which the Fed announced quantitative easing… Here’s a snippet of the meeting minutes…

With interest rates already abutting 0%, the FOMC members “agreed that substantial additional purchases of longer-term assets eligible for open market operations would be appropriate.” The issue was which assets should see increased purchases. Today’s minutes revealed that a single member felt that additional purchases should focus on long-term Treasuries while another member argued in favor of a bias towards agency mortgage-backed securities (MBS). A compromise was struck by opting for increased purchases of a broad range of assets including both Treasuries and MBS. The FOMC eventually announced a $750 billion increase in mortgage backed securities purchases, introduced $300 billion for the purchase of Treasuries and $100 billion in other agency debt. The minutes indicated that the various members were willing to agree to this broad array given that “the effects of any one tactic were uncertain.”

Well… The euro (EUR), which was trading at 1.33 when I came in, has backed up a bit… But the bias to sell dollars remains at this point, so no biggie.

Today’s data cupboard will yield the Weekly Initial Jobless Claims, which is expected to remain above 650K in total claims filed per week… We’ll also see the color of February’s trade deficit, which is expected to remain around $36 billion, with both imports and exports falling.

Someone asked me to address the TIC data that I used to make such a fuss over… You may recall that TIC stands for Treasury International Capital, and in short is the measuring stick that’s used to calculate the “Net Foreign Purchases” of our debt… And we need foreigners to buy our debt, because class? That’s right, we need it to finance the deficit… The TIC data has been quite weak lately, and the reader wanted to know why I no longer make a fuss about the data coming up short… Well, I still care… But the markets don’t seem to care. Are they dolts? Probably… But I would get all wound up about the data coming in short to finance the deficit, which means the dollar should get hammered, and it would be nothing, nada, zilch, zip from the markets… I shake my head in disgust, but carry on despite the dolts in the markets.

Currencies today 4/9/09: A$ .7125, kiwi .5785, C$ .81, euro 1.3285, sterling 1.4680, Swiss .8720, rand 9.1330, krone 6.6375, SEK 8.1775, forint 219.70, zloty 3.3450, koruna 20, yen 100, sing 1.5150, HKD 7.75, INR 49.69, China 6.8345, pesos 13.33, BRL 2.2020, dollar index 85.20, Oil $50.92, Silver $12.35, and Gold… $884.20

That’s it for today… Well… For those of you with enquiring minds… My trip to the eye specialist yesterday was interesting… The pictures showed the fluid on the back of my eye, drying up, but still there, just not as much. He still believes that a good portion of my eyesight in my left eye will return to me. Those shots are so darn unpleasant! I can’t begin to explain to you just how unpleasant those injections can be… But it is what it is, and if it gets my sight back, so be it! I get my quarterly scans next Tuesday; let’s keep those fingers crossed for yet another “clean” scan! There’s a day game at Busch Stadium today, but I feel so darn bad, I’m going to have to miss it… You know there’s something wrong, when I pass up a day game, for that’s when baseball should be played! I’ll be writing tomorrow, as Good Friday isn’t a work Holiday for the banks, so I’ll talk to you then! I hope your Thursday is Thunderin’!

The Daily Reckoning