July 2008 - Daily Pfennig

A free, quick-reading daily e-letter on world currencies, economic trends, and the occasional baseball score.

Daily Pfennig

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  • Don't be fooled by the US GDP...

    * Don't be fooled by the US GDP... * Canada, Mexico, and Brazil rally... * Aussie dollar falls... * Japanese to keep rates unchanged... ** Don't be fooled by the US GDP... Good day...And welcome to the last day of July. The dollar held its ground through most of the trading day but started to sell off as the day wound down. The currency markets seem to be stuck in a summer doldrums, with few dramatic moves. With many of the head traders enjoying a summer break (ours included), currency desks are reluctant to take on large positions. And who can blame them as the recent global economic data has left investors wondering where to turn. As I have explained to several recent callers, the global economy is experiencing a slowdown as the high commodity prices and a slumping US economy has hurt growth. The economic releases have shown an overall slowdown in growth, and rising global inflation. But the overall slowdown will have differing effects on the currencies. Asia is slowing, but a slowdown from double digit growth in China and India is much different than a slowdown in the US where growth is around 2%. Also, the Asian countries have kept interest rates low to try and keep their currencies from appreciating too quickly. These countries are therefore in a much better position to combat inflation, and can allow currency appreciation to help combat rising prices....
  • US consumers come to the rescue of the dollar...

    * US consumers come to the rescue of the $... * European data comes in negative... * Currencies down under take a hit... * Goldman suggests investments in Norway... ** US consumers come to the rescue of the dollar... Good day... The dollar bulls took control of the currency markets yesterday after the US consumer confidence numbers looked slightly less awful than expected. The better than expected confidence number caused the dollar to jump over one and a half cents vs. the Euro and close to 1% vs. the NZD$. The gain by the US$ was the biggest one day move in almost two months. Chuck, who is enjoying a much deserved break this week, sent me his thoughts on this dramatic move by the dollar: "It sure looks like the markets once again, took the bait hook, line and sinker yesterday... I mean, Consumer Confidence rises from a deep dark abyss, and the markets were singing, ding, dong the witch is dead, ding dong the wicked witch is dead. The wicked witch here is the bear and what it's done to the markets this year. Since November, stocks have lost plenty of ground, and I for one truly suspect there will be more losses in the days ahead. But... Not yesterday, and not a losing day for the dollar either! Probably the best 1 day performance I've seen in the dollar in some time......
  • Budget gap to approach $500 billion...

    * Budget gap to approach $500 billion... * Deficits lead to record borrowing by the US... * Commodity currencies take divergent paths... * India raises rates... ** Budget gap to approach $500 billion... Good day... The currency markets were mostly flat yesterday with all of the majors stuck in fairly tight trading ranges. With no economic data released, the trading desks were mostly dead. The story which dominated the screens yesterday was the announcement of a record $490 billion US budget gap. The Bush administration said the US budget deficit will widen to a record next year, leaving a deep budget hole. The bigger shortfall reflects dwindling tax receipts because of the US economic slowdown, the cost of the $168 billion economic stimulus package and spending on the wars in Iraq and Afghanistan. The shortfall reflects a deterioration of the budget over the past seven years. Bush inherited a budget surplus of $128 billion when he took office in 2001. The budget worsened almost immediately, because of recession, the Sept 11 attacks, the beginning of the war in Afghanistan and, later, the war in Iraq....
  • Dollar continues to slide...

    * Dollar continues to slide... * Housing bailout passes congress... * Chinese Renmibi falls... * Aussie dollar peaked?... ** Dollar continues to slide... Good day... And welcome to the last week of July. I spent the past week fishing with my son and father in law up in Manitoba, Canada. We had some great weather, and caught an absolute ton of Walleye and Pike. My son caught a Pike almost as long as he is tall. Just a great guys trip; but enough about my time off, I'm back at work now, so lets get to the currency markets. The dollar continued to slide throughout Friday's trading as concern of further US credit losses trumped some negative data released in Europe. The dollar dropped for a second day against the Euro after a story in the Financial Times quoted Gary Stern, president of the Federal Reserve Bank of Minneapolis, saying the credit crunch will worsen. Nothing new here, but as Chuck stated in Friday's Pfennig, currency traders continue to play the game of "Who's Data is Worse" with the US economic data coming in even worse than the rest of the world....
  • More Awful Housing Data!

    * Existing Home Sales fall... * Foreclosures spike! * Euro rebounds... * Aussie dollar sees some weakness... ** More Awful Housing Data! Good day... And a Happy Friday to one and all! Well... The touch of food poisoning I got ( I think) stayed with me most of the day yesterday. I did make it to my presentation with Addison Wiggin, but you should have seen me... I was a mess... But I got through it, stayed at the booth for an hour to talk to people and then headed back to the room to basically fall asleep until now... UGH! I have to say that I believe this conference to be the absolute best conference I have ever attended, and believe me, I've attended quite a few conferences in my time! We have talked to so many people that are genuinely interested, some that already completed their applications, and then there were the 100's of people that are already customers, wanting to know more! It has been a great conference!...
  • RBNZ Cuts Rates...

    * The dollar swings it mighty hammer! * Weekly Jobless Claims spike! * Exposing the debt in N.Z.... * The Fed's Beige Book is grim... ** RBNZ Cuts Rates... Good day... And a Thunderin' Thursday to you! It's not so Thunderin' for me this morning, as I must have eaten something that didn't agree with me last night... Therefore I was up most the night sick... This will be ever so short-n-sweet, and then I'm going back to bed, I've got a presentation this afternoon with Addison Wiggin, I've got to be in tip-top shape for that! The dollar swung its mighty hammer again yesterday, bringing the euro to the 1.56 handle, with all the other usual suspects falling in line behind the euro. The markets are ga-ga with news that leads them to believe the "worst is over" in the credit crunch... I beg to differ on that, but then, I'm just one guy, one voice, one letter......
  • A Perfect Storm...

    * The euro runs into a summer storm... * Plosser wants higher rates... Yeah, right! * Aussie dollar strength to return... * Canadian inflation pops higher than expected! ** A Perfect Storm... Good day... And a Wonderful Wednesday to you! A great day yesterday, as I was able to meet up with old friends, readers, and well wishers... So many people were just glad to see me here! I told them it was good to be seen! Looks like the oil rigs dodged a bullet with Dolly in the Gulf Coast, and that's a good thing! But Dolly will still hit South Padre Island today, please keep that in your thoughts today... Well... You know how I explained on a couple of occasions in the past couple of weeks, a Perfect Storm for the dollar? Well, those never materialized due to a number of reasons... Yesterday, we finally got that Perfect Storm, but it wasn't for the dollar... You know those Mid-Western summer storms, when in the middle of the day, it turns pitch-black, and the trees all begin bowing from the wind, and then the rain comes down hard? Well, that's much like what happened yesterday with the euro... Here's the skinny......
  • More Losses!

    * Currency rally runs into profit taking... * Mortgage related losses continue to mount... * Taking risk... Just seems stupid right now... * Canadian Retail Sales post a gain... ** More Losses! Good day... And a Terrific Tuesday to you! It was a long day of travel for yours truly, who saw two gate changes and two plane changes along with 1.5 hours of delay... I ran into a reader on the plane, that said, Hey! Aren't you Chuck Butler? I could see all the people sitting around me thinking that they should know Chuck Butler, he must be a celebrity! HA! Little did they know, it's just little Ole me, the Pfennig writer! Well... The currencies had a good day VS the dollar, as the euro was able to gain well into the 1.59 handle... Part of my presentation to the main stage crowd tomorrow (900+) is going to ask the question... Where are all those people that claimed the weak dollar trend was over last month when the Fed stated they were going to be inflation fighters? They are no-where to be found! That's where! I recall that even a big name guy at the Royal Bank of Canada, flatly stated the weak dollar trend was over... Where have all the naysayers gone? Long time passing......
  • Taking On Risk Again!

    * Mexico's rate goes higher! * A 100 Billion dollar note? * Euro rates to go higher? * Oil's sell off might be short-lived... ** Taking On Risk Again! Good day... And a Marvelous Monday to you! All my bags are packed, I'm ready to go, the taxi's waiting, he's blowing his horn... Yes, I'm off to Vancouver this morning... This becomes a labor of love for me especially today, with Chris taking off the same week I'm in Vancouver, I'm writing the Pfennig on my way to the airport! Graham Nash wrote a song about that... But I won't go there after the intro! Oh, what the heck! Just a song before I go... This will be short-n-sweet this morning, as I've got to get to the airport! Friday, saw the currencies range bound once again, as the data cupboard was empty. And... We didn't have any major losses print, or we didn't have any news at all about all the rot on the U.S. economy's vine. The Biggest mover was... Drum roll please... The Mexican peso! Yes, the Mexican peso outperformed all other currencies last week, reaching a 5-year high VS the dollar after the Mexican Central Bank raised interest rates 1/4% (25 BPS) to 8%, pushing the peso to its highest level VS the dollar since 2003!...
  • Losses Keep Piling On!

    * Range bound currencies... * Stocks rebound... * So, you think Oil is expensive? * Gold prices back off... ** Losses Keep Piling On! Good day... And a Happy Friday to one and all! I'm running late today, was up most of the night with stomach problems, and overslept this morning. This is my last day on my 4-weeks treatment, so maybe by this time next week, I'll be able to feel normal again. But, it's a Friday! And... I'll be gone the next 3-weeks! First to Vancouver, where I'll still write the Pfennig each day, but then on vacation, and on to San Francisco... I'll be back in the saddle on August 11th... Well... We had a range bound day in the currencies yesterday, with a bias to buy dollars, as the markets breathed a sigh of relief at JP Morgan's 2nd QTR earnings... JP Morgan beat the estimates, but the thing I don't get is why there was dancing in the streets when those earnings were 53% below those a year ago. So, good for them for beating the estimates, but 53% below last year, I would certainly think it would have raised a few eyebrows... In fact, JP Morgan head man, Jamie Dimon said, "Our expectation is for the economic environment to continue to be weak -- and to likely get weaker -- and for the capital markets to remain under stress. We remain conscious that since substantial risks still remain on our balance sheet, these factors will likely affect our business for the remainder of the year or longer."...
  • Bunning Throws A High Hard One!

    * The dollar has a mini-rally... * TIC's data... Very scary! * Sov. Wealth Funds dropping the dollar? * Inflation or deflation? ** Bunning Throws A High Hard One! Good day... And a Tub Thumpin' Thursday to you! The dollar rallied most of yesterday, but has backed off in the morning markets ahead of the Housing Starts data in the U.S. that will print later this morning. I've got some words to Big Ben from Senator Jim Bunning for you this morning, along with some more discussion on whether our bullet is inflation or deflation... All this and more, as we get to Tub Thumpin' on this Thundering Thursday! Well... As I mention above, the dollar was the belle of the ball yesterday, as the U.S. Financials recovered, thus giving those dollar / U.S. assets bulls a reason to believe... Someone like you makes it hard to.. No wait, that's Rod, not the reason these dolts bought dollar assets! The euro fell all the way to 1.58 and looked as though it would trade with at 1.57 handle, this just one day after trading above 1.60! What the heck was going on here? Ahhh, grasshopper, sit down, and listen......
  • Oil Price Slides!

    * Big Ben in a predicament! * The euro retreats after new high... * Retail Sales disappoint! * Yen and francs on the menus again! ** Oil Price Slides! Good day... And a Wonderful Wednesday to you! 3 straight days without rain here in St. Louis! WOW! It did however, rain on the currencies' parade yesterday. About mid-morning, the brakes were applied to the run on the dollar, and the car was put into reverse. Retail Sales disappointed, and PPI is not anything to laugh about... All that and more, as we head into the day after a 15-inning All-Star Game! Front and Center though is the good cop, bad cop thing that played out with Fed Chairman Ben Bernanke (bad cop) and SEC Chairman Cox (good cop)... Big Ben sent the dollar packing in the morning with his statement that highlighted the Fed's predicament... Big Ben noted the parts of financial markets remained seriously disrupted (which screams, no rate hike), but that dollar weakness had helped cause inflation to rise (Here he goes again trying to blame everyone else for the Fed's creation and feeding of inflation... Oh well, this statement screams, no rate cut!). The currencies all took turns taking a swing at the piñata (dollar)... And... It looked like the volcano was about to blow... Oh, I don't know, I don't know, I don't know where I'm a going to go when the volcano blows! (Ahhh, a little Jimmy Buffett on a Wonderful Wednesday!)...
  • Credit Woes Sink The Dollar!

    * No Bailout for Freddie and Fannie... * The euro reaches a new record high! * More risk today... * Aussie hits 25-year high! ** Credit Woes Sink The Dollar! Good day... And a Tip Top Tuesday to you! I thought I would change it up there today... Well... Overnight, we've seen the euro reach a new record high VS the dollar, only to give some of that ground gained back on some weak German data. There was more news yesterday regarding the Freddie and Fannie saga, but I've grown tired of that talk, we dance now! Seriously, though, I have grown tired of all that Freddie and Fannie talk, that I'm going to go through an exercise explaining what GSE's are and then go on with life... So... The euro reached a new record high overnight of 1.6038! WOW! This was reached based on the fears that credit problems in the U.S. are going to put the kyboshes on what little economic growth we now have. But the shine on the euro was rubbed out by a very weak ZEW... German Investor Confidence as measured by the think tank, ZEW, fell to a record low this month on the surging inflation problems, and rising interest rates. So for now, the euro is back below 1.60, but hear me now and listen to me later... This ZEW will soon be in the rear view mirror, and the euro won't have that albatross around its neck as it revisits its overnight high....
  • Another Perfect Storm Averted!

    * Paulson calms fears... For now! * The dollar gets sold again... * More risk events... * Bill Gross wants dollars! ** Another Perfect Storm Averted! Good day... And a Marvelous Monday to you! Well... One of St. Louis' landmarks was sold this morning... One of my fave companies for a number of reasons, Anheuser Busch, was sold to InBev this morning... Just another in the line of Corporate Headquarters that will no longer reside in St. Louis... At one in the 80's, St. Louis was the 5th largest city, with Corporate Headquarters, in Western Hemisphere... I doubt we even are on the list these days... OK... Well... Friday was chock full-o-fun, and not fun for some, as U.S. Treasury Secretary, Paulson, tried to calm the markets regarding Freddie and Fannie... That may have some soothing effect in the short run, but if home prices keep falling, and mortgage backed bonds keep losing value, this problem will return to the markets......
  • Are Freddie and Fannie Insolvent?

    * Poole slams Freddie and Fannie... * The dollar gets sold again... * Bad data for the dollar today... * Renminbi matches '07 performance! ** Are Freddie and Fannie Insolvent? Good day... And a Happy Friday to one and all! A Fabulous Friday indeed! The euro broke out of that tight trading range yesterday, we had a distorted Weekly Jobless Claims number, and the un-dynamic duo of Ben and Hank got taken to the woodshed by Ron Paul... All this and more as we head into the 2nd Friday of July! OK... First on this Fabulous Friday, I forgot to talk about ex-St. Louis Fed President William Poole's comments about Freddie and Fannie yesterday... These comments were responsible for bringing the mortgage meltdown front and center to the markets once again... So... What did Poole say? Well... Poole flatly stated that, "Freddie and Fannie Mae are insolvent"... Uh-Oh! As I thought earlier this week that this meltdown of Freddie and Fannie Mae could be the risk event I've been talking about... Well... If Poole is correct... We're here......

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