Today's Pfennig!
G-7 Takes China To The Woodshed!
Good day... Wake Up Sunshine... Whew! I am beat! Too much yard work, good thing
it wasn't a 3-day weekend! Sounds like the Finance Ministers of G-7 were working
hard this past weekend too... They came out with their harshest words against
China's peg to the dollar, yet. We've got that to talk about, along with a rally
in the currencies, and last Friday's NFSP data... So, if I don't lay my head
down and take a nap, I'll get to the skinny on this right away!
First... The G-7 meeting this past weekend, has got the dollar bulls on the run
this morning, and euros are 1.2985, sterling 1.90, and so on... The meeting was
led by our own Treasury Sec, John Snow, who told the Chinese that they should
embrace a looser exchange rate immediately. But the harshest words came from
Canada's top Treasury gun... Ralph Goodale, who said that "China should
understand there is a freight train coming as U.S. and the European Union weigh
tariffs or import restrictions on Chinese goods." WOW, Now that there is
fightin' words!
I believe that this is the day in history that Paul Revere rode through the
streets of Boston warning that the Red Coats were coming... See the connection?
According to Mr. Goodale, China needs their own Paul Revere! Anyway... I find
this G-7 meeting to be very interesting indeed... John Snow and his band of
merry men were noticing the dollar below 1.30 euro, and decided that this
meeting would be used to let everyone know, in case there were some questions,
that the U.S. wants a weaker dollar... Forget what Greenspan says, he doesn't
have anything to do with the Treasury!
So, the dollar bears have come out of their 3-week hibernation, and are marking
down the dollar once again. It's like thunder... Lightening... It's
frightening... I better knock on wood! Ooops, got carried away there! Oh yeah, I
did, but these dollar bear sightings get me all lathered up!
Friday's Net Foreign Security Purchases (NFSP) data come in higher than
expected, which on the surface is good news for the dollar, but with the total
at $85 Billion, the dollar should have rallied hard on that news, and it
didn't... Oh, it did a little bit, but still remained in our recent range... No,
because when you scratched the surface you found that once again, like last
month, a huge chunk of Treasury buying came from the Caribbean... Yes, offshore
hedge funds... Like I said last month, that type of buying isn't a long term
relationship, and one (dollar bulls) shouldn't get too excited about this
data...
The dollar began its slide on Friday morning after the U. of Michigan Confidence
report showed a sizable drop in Confidence... Let me say here, what I said on
the desk after this report was printed... That ever since Big Al's bomb on March
22nd, every piece of data that has been printed has showed a soft side to the
economy... And now this drop in Confidence... And next week we'll see first
quarter GDP, which is expected right now to be around 3.5%... Again... Good, but
not the stuff the Fed was telling us about!
But first... This week, we'll see both PPI, and CPI inflation reports... I think
these are huge... Say hello to my little friend! OK, enough of that! Yes, PPI
and CPI, for whatever they are worth! For new readers, I say that because a long
time ago we all learned that the Gov't takes out things that we use everyday in
their inflation reports... However, the markets believe these reports, so we
have to play along!
Looks like getting back over the 1.30 figure is going to be a tough row to hoe,
for the euro... There will be a ton of trades sitting there waiting for the bell
to go off, and trigger them to take a profit... But once those profit taking
trades have been executed, and the dust settles... The euro should be able to
make this push, because in the end.... This is the End of the Innocence for
dollar and it's need to attract over $2 Billion a day....
Currencies today: A$ .7680, kiwi .7170, C$ .8025, euro 1.2990, sterling 1.9005,
Swiss .8390, rand 6.2725, krone 6.3250, forint 191.50, zloty 3.2275, koruna
23.26, yen 107.45, baht 39.57, sing 1.6540, pesos 11.1250, and gold... $426.03
That's it for today... Great weekend for my Cardinals... Now let's see if they
can go a roll! We received some rave reviews on our new Asian Tiger Index CD
that I announced last Friday... Again, if you're interested call our desk at
1-800-926-4922. Alright... Made it through without that nap! Have a great Monday
and week!
Chuck Butler
President
Everbank World Markets
