It’s not getting any better here in the US, folks. Initial jobless claims reported this morning rose to 500K, the highest reading since last November. As a result the market has flipped from initial risk taking to mild risk aversion this morning, despite Dollar weakness vs. the Majors. Uncertainty abounds in the business community and all of the great new stuff coming out of Washington DC is the direct cause of this anti-business climate.
Meanwhile, growth forecasts in Germany were raised this morning by the Bundesbank from 1.9% to 3% as the German economy is rocking and carrying Europe as a whole. PPI figures in the Euro zone’s largest economy came in higher than expected, coming in at 3.7% (YoY) vs. an expectation of 3.3%.
In the UK, retail sales figures blew out estimates, reporting a .9% increase vs. an expectation of a .2% rise. This contributes to the strength of the UK economy and could foreshadow a return to normalized economic policy sooner than later. In addition, the UK budget deficit came in less than expected.
In the forex market:
Aussie (AUD): The Aussie is trading mostly higher this morning as word on the street is that China will be purchasing assets in commodity rich nations. Despite Dollar weakness due to the lousy jobs report, what looked like initial risk aversion may actually be super-ceded by poor US fundamentals.
Kiwi (NZD): The Kiwi is lower this morning as PPI figures rose figures rose 1.4%, prompting RBNZ Governor Bollard to say that firms should base their pricing on low underlying inflation and not on higher sales taxes. Yeah good luck with that one, buddy.
Loonie (CAD): The Loonie WAS higher going into the initial jobless claims data, but quickly flipped around vs. USD as the prospects of a declining US economy are bound to hurt Canadian exports. Whole sales figures were down .3% vs. an expectation for a rise of .4%. Canadian CPI data is due out tomorrow. (Click chart to enlarge)
Euro (EUR): The Euro is trading higher as anti-Dollar sentiment has created demand for the currency of a region that is actually undertaking sound economic policies. German growth forecasts have been increased, and recent bond offerings from the troubled EU nations have gone off without incident.
Pound (GBP): The Pound is higher as retail sales figures came in much better than expected showing sign that the UK economy is picking up steam. This may cause the BOE to return to normalized monetary policy, despite the planned reductions in government spending. (Click chart to enlarge)
Dollar (USD): The Dollar, much like the overall US economy, is a disaster. Were it not for risk aversion, this thing could be worthless. Initial jobless claims continue to get worse, and cash-rich businesses are not hiring due to uncertainty thanks to Washington DC. I wouldn’t be surprised to see another stimulus package…. These clowns really haven’t a clue.
Yen (JPY): The Yen is higher this morning on risk themes, as money flows from the Dollar. Talk of intervention is waning, as it may be too great a challenge to try to combat both horrible US monetary and fiscal policy.
It may be time to get off the sinking ship. Seriously. If you saw a ship heading straight for an iceberg with the clueless captain too blind to realize the danger, it might be time to go. The US economy, folks, is the Titanic. I try to steer clear of the politics, but it’s unfortunate that a bunch of people who win popularity contests set economic policy here in the US.
Just 3 short months ago, everyone was predicting the collapse of the Euro, yet in less than one quarter they have restored market confidence. Meanwhile, here in the US, there is no confidence.
We were told that the stimulus package was going to reduce unemployment, yet it remains at catastrophically high levels. The only reason the rate is not increasing is because the new amount of jobless claimants is roughly equal to the amount that are no longer eligible to claim! Accounting tricks, gimmicks, and massaging of the numbers has become the flavor of the year. When that doesn’t work, point the finger at someone else.
Well today, I am going to point the finger. Not at any one individual, but rather at the iceberg we are going to hit. If we don’t change course pronto, then we have no one to blame but ourselves.
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