Once again, the story in world markets is Dollar weakness, which has induced major risk taking. Overnight, stocks were higher and commodities and US stock futures are higher to start the morning.
Today is a morning that is short on news from around the globe, but this morning’s US trade deficit, PPI, and jobless claims figures may move markets. The figures have just come in and all three metrics have come in higher than expected, which is causing a slight pullback from risk-taking.
What we are seeing in the forex market is that the Aussie fell just short of parity with USD, the Loonie has surpassed parity, and the Yen has set a new 15-year high vs. USD. Interesting times indeed.
In the forex market:
Aussie (AUD): The Aussie came within 10 pips of parity before paring gains back to .995 vs. USD. The Treasurer of Australia said that Aussie is strength is due to a healthy economy. He is correct. (Click chart to enlarge)
Kiwi (NZD): The Kiwi is mostly lower as retail sales figures came in worse than expected overnight, posting no gain vs. an expectation of a .3% gain. In addition, house sales were lower as were home prices, showing signs that economy is floundering a bit. However, the budget deficit came in lower than expected, which is a positive sign and general risk-taking in the market has kept it above .76 vs. USD.
Loonie (CAD): Congrats to our neighbors up north as their dollar is now worth more than ours. Higher commodities prices help contribute to strength, as do Fed dollar debasement policy. (Click chart to enlarge)
Euro (EUR): The Euro broke intermediate term resistance at 1.40 vs. USD and has traded as high as 1.41. The outlook for the German economy, the largest in the EU, has improved dramatically as forecasts are now calling for its economy to expand at almost twice the pace as had been previously expected. (Click chart to enlarge)
Pound (GBP): The Pound is higher today as well as (surprise!) the Dollar is weak. Money flows are fleeing the Dollar at a break-neck pace and are seeking alternate places to hide.
Dollar (USD): What more can be said about the Dollar? PPI figures came in higher than expected though if you take out food and energy, they met targets. After all, who cares about food and energy prices, right? 12k more people filed unemployment claims this week, but what’s a few K between friends, right? And of course the trade deficit came in higher than expected because Dollar debasement has been encouraging exports. The problem of course is that we no longer export anything, except maybe inflation and now bad will. So another commendable performance for the Dollar, bravo! Be happy because your stocks and commodities are higher (unless of course you are unemployed and don’t own stocks and commodities) but don’t get too happy as when you sell to reap those “gains” you have to own Dollars.
Yen (JPY): The Yen has reached a new 15-year high vs. Dollar and has traded an 80 handle overnight, and it looks like further BOJ intervention talk may have just been hot air. (Click chart to enlarge)
As you can probably tell by now I am quite pleased with the direction coming from the Fed and Washington DC—not at all. The blatant idea that we are going to try to encourage inflation to help solve our debt problem is a joke. What’s going to happen in this scenario? Both food and energy prices will go higher, which will then cause more and more people to seek public assistance as they can no longer afford the basic necessities to live.
Meanwhile home prices will continue to decline despite the foreclosure moratorium as no one in their right mind would go anywhere near a house (or other large major purchase) with the economic outlook as bleak as it is. You can thank private-jet flying politicians and the resident golfer in chief for putting forth policies so anti-business that the US is now becoming a joke.
There is still growth going on in the world today, it’s just not coming from the US. I feel for those who do not know how to diversify away from the toxicity of the US dollar. For the rest of us who trade forex, let the good times persist!
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