Chuck Butler’s Currency Round Up
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Bond king backs the dollar… Hawkish ECB will support euro… Euro-wannabies follow the euro… Aussie dollar heading for parity… Canadian loonie looking good…
I see where Bill Gross, the bond king, came out and said that he now favors the dollar over the euro for the first time. He believes the slowdown in the Eurozone will bring the euro back down to earth. I on the other hand don’t believe the slowdown in the Eurozone will matter enough to offset the currency to the dollar, as the dollar continues to get sold on “risk events” in the U.S. financial sector. I’m sorry to see the bond king go this way; he had always been an “awful fundamentals in the United States will lead to dollar weakness”, kind of guy…
The euro will see some data on its end this week also, as Eurozone CPI inflation prints on Wednesday and the German ZEW on Tuesday. Look for the Eurozone inflation to remain above 4%, which should bring about some hawkish remarks from European Central Bank (ECB) ministers. Those hawkish remarks should help the euro maintain its edge versus the dollar.
You know, every once in a while I remember to write something about the Euro-Wannabes… Hungary, Poland and the Czech Republic. I gave them that name “Euro-Wannabes” seven years ago, when I created the Euro-Opportunity Index CD, one that continues to book some very nice returns. These three were deemed to be on the “fast track” to euro acceptance… But something funny happened on the way to the forum for these three. They haven’t joined the euro yet, and others have moved in front of them. Here’s the thing though, they are still loosely tied to the euro… So, the euro strength shows up in Euro-Wannabe strength… It’s that simple!
The Aussie dollar (AUD) followed the Big Dog, euro, on Friday, as it hit a 25-year high of 97+ cents! WOW! You know, I’m hearing lots of talk from people/analysts who believe the Aussie dollar is vulnerable. I’m not seeing that, or getting why they feel that way… I even saw an article in The Economist that hinted toward Aussie dollar weakness. I would say, that I think the Aussie dollar will get to parity before it falls to 90-cents… So, we’ll have to see who’s right, eh?
The Canadian dollar/loonie (CAD) was able to push past 99-cents on Friday… It’s about time it got out of the 98-cent handle! Canada saw it’s unemployment rate edge up to 6.2% on Friday, but the move in the actual numbers was miniscule, so don’t expect this to push the Bank of Canada (BOC) to another rate cut when they meet this week. In fact, I believe the BOC is done with rate cuts, which should underpin the loonie as we go forward.
Source: Another Perfect Storm Averted!
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Tags: Australian Dollar, Chuck Butler, euro, US dollarAbout the Author
Chuck Butler, is the author of The Daily Pfennig, which is republished at The Daily Reckoning. His respected analysis is frequently quoted in or referenced by: the Wall Street Journal, U.S. News and World Report, CBS Market Watch, USA Today, CNNfn, the Chicago Tribune and many other publications.
The Daily Reckoning offers a "uniquely refreshing" perspective on the global economy, investing and the ability to live well in uncertain times. You will learn what you can expect from today's markets and how to prosper in the face of uncertainty.