A Fed Head Boondoggle!

Good day. I’m late. I’m late! Had to pack. Couldn’t find my car keys. Oh, joy. It’s a Monday! Oh, well. Hope your weekend went well. Mine was good. Enough sunshine to keep everyone happy! I head to Stowe, VT, this morning, and I’ve got to get my trading all set up, so this will be short and sweet.

OK. The currencies really didn’t move much when you get right down to it, last week. I just don’t know if we’ll see much movement this week, as we head into the Labor Day weekend. The last holiday weekend of the summer, and I’m certain there will be plenty of traders heading to the Hamptons early on Friday!

So, nothing more than range trading for the week.

Between now and the Hamptons, we’ll see plenty of data, ending the week with a Jobs Jamboree Friday. This will be an important Jobs Jamboree due to the fact that we haven’t experienced a 200,000 jobs-creation month since February. And it’s gone downhill from there! Last month, you may recall that the figure was only 113,000. This report goes a long way toward the attitude of the Fed Heads when they meet next. At this point, I can’t see the Fed going back to the rate-hike table, at least for the next meeting. And that should weigh heavily on the dollar.

Central Bankers from around the world were at their annual boondoggle in Jackson Hole, WY, this past weekend. And I just had to give you this quote from one of my favorite economists, Stephen Roach of Morgan Stanley. Mr. Roach wrote this in his weekly not on Morgan Stanley’s Web site, Friday, regarding the state of the housing market:

“Ironically, at just the moment when it has become evident that the US housing bubble has burst, the key architects of this sad state of affairs — America’s central bankers — are cavorting at their annual retreat in Jackson Hole, Wyoming.  Denial has long been deep at this Fed love-fest.”

Nothing of importance was uttered in Jackson Hole. So, it was a big boondoggle.

Another piece of data that the Fed Heads look at closely that prints this week is personal consumption, and this prints tomorrow. And then, two of my favorites personal income and spending print on Thursday. From the forecasts, it looks as though we will have gone back to spending more than we make after a month of the opposite.

There is news out of China this morning that the Peoples Bank of China has announced a stronger reference rate around which it allows the currency to trade. Hmmm. Of course, there are no details of this announcement, but the renminbi did rise versus the dollar, after the announcement of a larger amount than previously allowed under the old set up. So, whatever they did, I’m all for it! Get that renminbi going!

Yes, the renminbi going will help the other Asian currencies, as I’ve explained so many times before.

Speaking of Asian currencies, there is a report out this morning that the Japanese yen is being used as a component in “carry trades” again, due to the Bank of Japan waiting so long between rate hikes. All I’ll say to that is: Go ahead and short the yen for your carry trade, but don’t come crying to me when it gets too expensive to carry because of BOJ rate hikes!

Currencies today: A$ .7585, kiwi .6380, C$ .9030, euro 1.2820, sterling 1.8970, Swiss .81, ISK 69.88, rand 7.17, krone 6.27, SEK 7.22, forint 215.60, zloty 3.0710, koruna 21.9650, yen 116.90, baht 37.63, sing 1.5760, INR 46.50, China 7.9707, pesos 10.95, dollar index 85.06, silver $12.46, and gold $624.05.

That’s it for today. See! I told you short and sweet! My beloved Cardinals finally found a way to sweep a series! Oh, and did you see where my fave TV show “24” won an Emmy for the best drama? What a great show! My little buddy’s flag football season opener didn’t go to well. Oh well, there are nine more games! Have a great Monday and week. I’ll talk to you again on Friday!

Chuck Butler
August 28, 2006

The Daily Reckoning