Global Growth on the Rise!

Good day…and a Happy Friday to one and all! Well, a completely boring day in the currencies yesterday as they traded within an even tighter range than the previous session. Snore city…I was actually looking for my Breathe Right strips! HA! Not that I didn’t have anything to do, I’m strictly talking about observing the currency markets!

Even a very slow Retail Sales number in the United States didn’t move the markets, and when that happened I was sure that traders and market participants are waiting for any word from the big boondoggle down in Singapore. Yes, I’m talking about the G-7 /IMF/ World Bank meeting. There have been some statements issued by the IMF already, let’s listen in to hear what they have to say:

The IMF revised up its 2006 and 2007 global growth forecasts to 5.1% (from 4.9%) and to 4.9% (from 4.7%) respectively. The IMF is truly bullish on Global Growth. (an IMF representative must have been in one of my recent presentations, where I focused on how strong Global Growth is!) Think about that statement for a minute…if the IMF is bullish on global growth that means they don’t believe China will slow down. That statement alone should have led to some good positive movements in the currencies of emerging market countries, and precious metals…I guess nobody was listening, eh?

The IMF has also issued a report calling for Canada to be the best performing economy going forward:  “Canada’s 2007 Growth Will Be Fastest in the G-7”, said the IMF, as they focused on commodities, and Canada’s Current Account Surplus. That note should help the loonie retain gains it has made this year vs. the greenback.

I’m surprised the IMF didn’t have good things to say about Norway. The IMF did forecast an average price of oil for 2007 of $75, which would allow Norway the opportunity to continue to pad their Current Account Surplus cash registers!

The Sedlabanki, Iceland’s Central Bank, raised interest rates again yesterday, this time by 50 BPS. I was a little surprised to see this news, as inflation in Iceland had really fallen recently. Chris Gaffney and I were analyzing an Icelandic Bond the other day that’s tied to inflation, and noticed that inflation had really backed off from the “go-go” days when inflation peaked in the double digits. Inflation fell 1% just last month to 7.60%, annualized. Still way too high…but falling nonetheless! We’ll have to see if our “rate committee” bumps up the interest rate on our Icelandic CD!

The Swiss National Bank (SNB) raised rates yesterday too! The SNB added 25 BPS to their official rate. You see what’s happening don’t you? It’s as I told you last fall that I thought would happen in 2006: Global Growth, fuels inflation, which fuels higher interest rates around the world, and that should help currencies gain on the dollar, who has had the two props supporting it in 2005 removed.

I read this morning that Ford is going to cut 10,000 salaried jobs. All of these job cuts will be in North America, and brings the total of salaried jobs cut by Ford this year to 40% of its salaried workforce. Ford is also offering buyouts to all of its hourly workers. This might not affect the U.S. economy right out of the starters blocks, but eventually it will. Not a good story…

It’s CPI Friday, here in the United States and the Eurozone. These should be market movers if they jump outside of the lines of what is forecast for them. In the United States we’ll also see one of my faves, Capacity Utilization. In addition, Industrial Production, and the U. of Michigan Confidence. Recall, last month I made fun of the U. of Michigan Confidence data saying that the people surveyed were confused and thought they were saying they were confident that the U. of Michigan’s football team would be strong this year! HAHAHAHAHA!

Not much else to talk about today, so short and sweet for you to end your week! Now onto the Big Finish! Just make sure you keep an eye on the big boondoggle down in Singapore, you never know. You just never know, when they might come up with a hoola-hoop!

In the currency round-up, I’ve added a new currency to track since its part of our Orient Opportunity CD, and that is: Hong Kong dollars, which will shown as HKD…

Currencies today: A$ .7525, kiwi .6585, C$ .8935, euro 1.2690, sterling 1.8820, Swiss .7955, ISK 70.30, rand 7.4150, krone 6.5250, SEK 7.27, forint 215, zloty 3.11, koruna 22.50, yen 117.50, baht 37.25, sing 1.5790, HKD 7.7820, INR 46.11, China 7.9430, pesos 10.97, dollar index 85.85, Silver $10.73, and Gold… $576.67

That’s it for today. Went to listen to an old softball teammate play his guitar and sing last night. Made me think back to the days that I used to do that, traveling around the country…a good time was had by all! Big weekend for sports…my beloved Missouri Tigers take on New Mexico (we owe them!), the Cardinals take on the Giants, the Rams take on the 49ers. And my little buddy’s flag football team takes on their big rival, the Cowboys, tonight! So, hopefully on Monday, I’m full of sports games! Have a great Friday and weekend!

Chuck Butler
September 15, 2006

The Daily Reckoning