Yesterday’s July 4th holiday here in the US represents the best of the American spirit, commemorating a time when the individual spirit triumphed over the collective tyranny of a government unresponsive to its citizens. The ensuing revolt granted citizens of this country freedom unknown to other regimes, and today we are seen as the standard of democracy.
Yet here we are today, some 200 years later, with an oppressive government that is unresponsive to its citizens. Government burdens, excessive taxation and regulation, as well as massive spending have left the individual in a system that is bloated, corrupt, and serving itself.
This Friday will bring the Non-Farm Payrolls Report here in the US, which is expected to show that the unemployment rate is not improving at 9.1%. Excessive government spending and easing monetary policy are actually harming the system and not helping it. It’s time to try something different.
Meanwhile, a Central Bank that is intent on responding to its citizens is the ECB, who are expected to raise interest rates 25bp on Thursday, despite the recent turmoil in Greece. While last week’s bailout was a temporary fix, policy-makers have their work cut out for them trying to figure out a way to keep Greece from default as the ratings agencies are begging for a way to slam Greece.
Various PMI data from around the globe is showing an economic slowdown, with China, the UK and the Euro zone all coming in lower than expected. Yet there is some feeling that all is not lost so this morning markets are mixed with neither a clear definition nor feeling about risk.
In the forex market:
Aussie (AUD): The Aussie is lower after the RBA left interest rates unchanged at 4.75%, citing slower growth than anticipated in 2011. With China applying the brakes to its economy, the next move for the RBA could be a reduction. Employment figures are due out on Thursday.
Kiwi (NZD): The Kiwi is slightly lower ahead of tomorrow’s GDP report which is expected to show slowing growth of .5% for the YoY figure. Between the rebuilding from the earthquakes and the slowing global economy, the RBNZ could be on hold for a while.
Loonie (CAD): The Loonie is also slightly lower today despite higher oil prices back to a 95 handle after 5 solid days of Loonie strength on the back of last week’s CPI report. This Friday will be the Canadian employment report which, if improved, may give the BoC a further support for a rate hike. (Click chart to enlarge)
Euro (EUR): The Euro is slightly lower and pulling back from 1.45 vs. USD as PMI and retail sales data came in worse than expected. However, the market has priced in a 25bp rate hike which would happen on Thursday if all goes as expected, yet the Greek drama is still not over and policy-makers need to find a solution that will satisfy the ratings agencies that a default has not occurred.
Pound (GBP): The UK rate policy decision is due out also on Thursday though no change is expected at this time despite the extremely high inflation. The GDP estimate will be released on Friday, which is expected to show a weakening.
Swissie (CHF): The franc is slightly higher to start the day as mild risk aversion is starting to creep in to the trading day. Friday’s unemployment rate is expected to come in steady around 3%, showing a resilient economy near capacity.
Dollar (USD): The Dollar has been noticeably weaker from last week’s selling and easy Fed monetary policy will be viewed as Dollar-negative all things being equal. Friday’s NFP report is expected to show the official unemployment rate above 9%, which means that the Fed ain’t doing anything for a while.
Yen (JPY): The Yen is strengthening a bit on risk aversion but is mostly range-bound as the US dollar attempts to hold the 81 level. Expect the Yen to trade on risk themes this week. (Click chart to enlarge)
It strikes me as amazing that the country that prides itself on being “independent” (we do have a holiday about it) is not at all. Our forefathers would be rolling over in their graves if they could witness what passes for independence these days.
Mandatory healthcare, regulation that hampers business and employment, massive entitlements and a ridiculous tax structure to support it. There is nothing independent about that!
In fact, these days, we rely on the benevolence of others to continue to lend us money so that fat-cat politicians can continue to spend money to buy votes to keep themselves in power. Meanwhile they have laid waste to the very fabric that made this country once great.
As the debate over the raising of the debt ceiling nears the self-imposed deadline, listen closely and watch the market activity. We need to decide what independence really means in this country and whether or not we have the will to recapture it. Otherwise, expect this nation to continue to weaken, taking down the economy and prosperity in the process.
So remember to buy currencies of those countries that are faring well, and sell those of countries who aren’t!
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