That didn’t happen. Instead, the Fed issued a fairly neutral statement. It said “downside risks to growth remain” – dropping a reference in June’s statement to “diminished” dangers – and price increases are of “significant concern.”

Chris Gaffney in The Daily Reckoning says the statement indicates the Fed realizes it will be forced to leave rates untouched. This leaves Mr. Market is to focus on the European Central Bank. Expect more inflation fighting from Jean-Claude Trichet and his pals…

The Eurozone has been posting some pretty poor numbers. Just this morning Germany reported that factory orders in the second quarter dropped for a seventh straight month in June. Manufacturing has slowed in Germany and Europe, as a stronger euro (EUR) has weighed on demand for exports. The continued slowdown in German industrial production increases the likelihood that the Eurozone is slipping into a recession.

But the ECB has never wavered from their mandate for price stability. This dogged fight against inflation will help maintain the long-term value of the euro. This latest dollar rally just doesn’t make sense when you look at the overall global economic picture. Yes, growth in the Eurozone is slowing, and Germany may be slipping awfully close to a recession, but the United States IS in a recession! And while the impotent FOMC sits back and ‘hopes’ that inflation will abate, the ECB has had the courage to continue its fight against inflation.

The past month has been hard on holders of foreign currencies, but investors have to look past this dollar correction. Only three major currencies have outperformed the euro since the beginning of 2008: the Brazilian real (BRL), Mexican peso (MXN), and Swiss franc (CHF). In the long run, I have to believe the inflation fighting of a strong ECB will help to maintain the euro’s value versus the U.S. dollar.

So today the markets’ focus will shift to the upcoming BOE and ECB interest rate meetings. ECB President Jean-Claude Trichet is expected to keep interest rates unchanged, but may signal that higher interest rates will be needed to combat inflation. Trichet will hold a press conference after the ECB announces its decision tomorrow, at 1:45 PM in Frankfurt. The currency markets will be listening to his every word, trying to uncover any indications of a change in his hawkish stance against inflation. Until then, the dollar will likely remain in a fairly narrow trading band versus the euro.

The Bank of England is also expected to keep rates unchanged, but the pound (GBP) will likely continue to come under pressure as many feel the BOE has been ineffective in its policy decisions. U.K. consumer confidence fell the most in at least four years, as England deals with a housing market slump that rivals our own. The markets have lost confidence in the Bank of England’s ability to deal with the current economic situation, and the pound continues to fall because of it.

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Source: Fed Not as Hawkish as Expected

Good day… And a Marvelous Monday to you! And welcome to June! Hey! June is busting out all over, all over the meadow and the field… Buds are busting out of bushes and the rompin’ river pushes every little wheel that wheels beside the mill! (And you thought I was just a rocker!) We are having network problems this morning, as some heavy storms ripped through St. Louis on Saturday night. So, the Techie people need to come in and get stuff re-booted, etc. This may go out late… And it may not… At this point, I at least have my laptop working!

Well… Friday saw little movement in the currencies… As I signed off I had told you that maybe someone had said “enough” with the euro (EUR) selling… As the day went on, it certainly looked like that had happened, given the euro’s rise to 1.5550, after looking up to 1.55 early in the morning.

There’s been a return to risk aversion overnight, as some news from the United Kingdom has reignited the fears that the banks may still be sitting on a ton of bad debt… Of course, as Pfennig readers, you already know this, as I’ve told you over and over again there are many more “risk events” for the markets to digest.

Here’s the skinny on the U.K. news… The United Kingdom’s largest lender of buy-to-let mortgages, Bradford & Bingley, came forward to reveal that they had booked a pre-tax net loss of 8 million pounds (after accounting for reductions in the value of its structured investment assets. They also announced that they were going to restructure, and that TPG, Inc. would invest about 179 million pounds.

Well… There you have it… More melting of the U.K. mortgage meltdown… But, hear me now and listen to me later, this isn’t isolated to the United Kingdom.

This is a Big Central Bank meeting week around the world, with the Reserve Bank of Australia (RBA) meeting Tuesday, the Reserve Bank of New Zealand (RBNZ) meeting Wednesday, the Bank of England (BOE) and European Central Bank (ECB) meeting on Thursday. I don’t expect any of these to move rates one way or another at this time. There’s a tiny light shining on the RBA to raise rates, but I think that will come at a later date.

As always, with an unchanged rate environment, the press conference following the meetings will be the more important of the events. I expect the RBA, and ECB to remain hawkish with their intentions to fight inflation, while the BOE and RBNZ are grasping at straws.

The ECB has to deal with the fastest inflation in its 10-year history… That’s not a good thing folks… Not for a Central Bank, whose mandate is to provide price stability. The economy may be cooling, which I’ll talk about in a minute, but inflation is rising – which means rates remain at current levels, or may even go higher as the summer days get hotter.

With the return to risk aversion overnight, the Japanese yen (JPY) has rebounded along with Swiss francs (CHF). It will be interesting to see if the risk aversion can set its teeth into all the “euphoria” surrounding the U.S. markets these days.

The Eurozone economy seems to be slowing down, which shouldn’t come as a surprise. I’ve said all along to expect a slowing of the economy… But not a complete shut-down/recession, and this “slowing” might just be what’s weighing on the euro these days. There’s an important thing to remember about the euro… It’s the “offset” currency to the dollar. So… Look at the two currencies… The dollar, with all the awful fundamentals, a recession, low yields, a war, etc. and then the euro, with a slowing economy… Eventually, the markets will return to the underlying trend.

But first, we might have to endure some euro weakness. But, remember, the dollar has all the bad fundamentals… Sort of like a gauntlet to get through… And while it’s getting beaten, the offset currency is likely to be in favor.

OK… A reader sent me a note about the one-year auction of Treasury Bills, and said, “This is scary isn’t it?” OK… Here’s the skinny on that… You see U.S. Treasury Secretary Paulson is feeling like he’s been “through the desert on a horse with no name” these days. The Treasury is going to issue one-year T-Bills tomorrow for the first time since 2001. With the expanding budget deficit, they have no other choice. The cheese that binds here is the fact that Paulson is indicating that the Fed Reserve, who in the past, had been a regular purchaser of the debt, may not be willing to do so… You see, the Fed is focusing on taking on all that bad debt from mortgage lenders… (Can you say, “The Fed’s focus is all screwed up?”… I knew you could!)

Want some proof that our deficit situation has become completely out of control… How about this little ditty… In the first five months of 2008, the Treasury sold $1.4 trillion of bills, an increase of 36% from the same period last year. Oh, but don’t let that get in the dollar bulls’ way of buying dollars! Deficits don’t matter, right? HOGWASH! You and I know that! But these guys running the country don’t believe it… And that’s a real shame, or sham… Pick one, either one applies!

OK… I have to spend a minute talking about the announced investigation of the CFTC (Commodities Futures). A lot of people believe the investigation will reveal some bad stuff being done to push up the price of oil… Now, I’m not going to sit here and pretend to believe there’s nothing to that… But come on! If the authorities really thought they were going to find something noteworthy, do you think they would announce to the public they were going to investigate? Wouldn’t you want to sneak around and zip the lips until you had the thieves?

I think that this has more “calm the nerves of the public” to it, than it has “to catch a thief”. I mean, come one, we don’t build refineries; we don’t drill where we KNOW there is oil; we haven’t done a darn thing about alternative fuel, despite knowing that we’ve needed to do something since 1973; and we drive gas guzzling cars… But wouldn’t it be better to “blame” someone else for the fact that gas is $4 a gallon? Let’s go after the commodities guys… There’s got to be something there!

It’s supply and demand folks… We have two large countries with billions of people that now demand oil that never really had a demand before… China and India… Take that supply and demand, and mix in a falling dollar, and you have high oil prices.

OK… Today, the data cupboard will show us the color of the ISM Manufacturing Index. You may recall this index has been holding out below the line in the sand of 50, which indicates contraction or expansion, for the past four months. The experts believe the index will have inched up to 48.5 in May – still below 50 – and that should weigh on the dollar a bit today.

We’ll have some other minor reports as the week goes on, leading into the Friday Jobs Jamboree… But I’ll talk more about the Jobs Jamboree as we get nearer to Friday.

The Aussie dollar (AUD), which has been the belle of the ball lately, showed some pimples this morning, after a report showed that retail sales in Australia had unexpectedly declined. I wouldn’t let my shorts get all bunched up over this. As I always say… One swallow does not make a summer… And this is the first “soft” economic report we’ve seen from the land down under. I don’t think we’ll see the RBA back off the rate hikes either!

Currencies today 6/2/08: A$ .9555, kiwi .7850, C$ 1.0045, euro 1.5550, sterling 1.9625, Swiss .96, ISK 75, rand 7.7175, krone 5.12, SEK 6.0175, forint 155.33, zloty 2.1750, koruna 16.15, yen 104.90, baht 32.58, sing 1.3630, HKD 7.8040, INR 42.35, China 6.9325, pesos 10.33, BRL 1.6240, dollar index 72.97, Oil $125.81, Silver $16.86, and Gold… $892.10

That’s it for today… My long time friend and colleague, Chris Gaffney, traveled to San Diego with his lovely family this past weekend to run in a marathon there. I marvel at his determination to do these marathons. Yesterday was darling daughter Dawn’s husband, Jerry’s birthday. We all celebrated at little buddy Alex’s baseball game! Alex just finished four games in five days… That’s crazy! Congratulations to Alex, as he just finished 6th grade! School’s out for Summer! School’s out for ever! OK, enough Alice Cooper for a Monday morning! Kristin’s back from Cancun today! It will be interesting to get her take of the conference! OK… Enough! Time to go! I hope you have a Marvelous Monday!

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Source: Reigniting Fears

Good day… And a Wonderful Wednesday to you! We received more rain yesterday, and the spotting of a twister less than five miles from our office! I’m beginning to feel as though we should be gathering up the animals in twos. The old saying, “right as rain” is losing favor on the list of things I say!

Yesterday, I left you with the thought that the London traders had been buying dollars since they arrived back from their three-day Holiday weekend. The U.S. traders did the same… And I believe profit taking was the order of the day. Unfortunately though, it left the euro (EUR) down one-cent on the day.

The data for the U.S. yesterday wasn’t anything that would lead one to buy dollars, but that’s the game that people play now, every night and every day now… So, let’s go to the tape on the data and be finished with that!

First off, the Case/Shiller Home Prices data showed more rot on the housing vine, as their 20-city home price index fell 14.4%y/y in March – a new record low in data back to 2001. Las Vegas led the way (-25.9%), with Miami a close second (-24.6%).

You can’t tell me the housing meltdown has “bottomed” – not with data like this! And… You can’t tell me that consumers are not being just beaten around the head and shoulders daily with gas prices, food prices, falling house prices, and debt up to their eyeballs!

Speaking of consumer debt… I’ll bet a dollar to a Krispy Kreme that the next big shoe to drop will be the “maxed out” credit cards that consumers have been busy running up, since their “ATM” (house) has closed. I’m not wishing this to come true, folks… I’m simply talking about what I see happening. Sure hope I’m wrong about that one, because credit card debt is the absolute worst thing to have hanging over your head!

OK… Down from the soapbox, and back to the data… The U.S. Conference Board’s consumer confidence fell more than expected in May from 62.8 to 57.2. This is a new low for the data since October 1992, and a depth surpassed only during and just after the depths of recessions since 1970. Need more data that spells “recession”?

Speaking of a recession… A reader sent me a note yesterday saying he was surprised that I didn’t mention that George Soros and Warren Buffett were both “Pfennig readers”, since both were quoted in Europe Saturday as saying that the United States is in a recession, and both said it will be long and deep.

Alrighty then! Hey! My friends down under sent me a note that said they fully expect the Reserve Bank of Australia (RBA) to increase interest rates 50 BPS before year-end. That’s two 25’s… With the first coming in August. Basically, I agree totally, and think these rate hikes will grease the tracks to parity for the Aussie dollar (AUD).

The news didn’t help the Aussie dollar yesterday though, as it looks as though the selling of the Big Dog (euro) affected all the little dogs, even down under!

I’m going to step up on the soapbox again here folks… So if you don’t want to subject yourself to more “Chuck’s views” then skip ahead. OK… If you’re reading this, then that means you’re ready… So, here goes… I was reading stories on the Internet last night and seeing how bloggers and writers are ripping the oil companies. Hmmmm… I guess the “rippers” don’t realize that the guys that head the oil companies don’t own them! The oil companies are owned by pension funds – you, me, and the guy down the street that cuts his grass with his shirt off! We even had some dolt representative from California mention “nationalization” for the oil companies. Of course, she called it “socialism”… Doltness showing there, folks… I shake my head in disbelief.

OK, I’m back now… I have more to say on the subject, but I had better stop there!

In the overnight markets of Asia and London, we haven’t really seen much movement to follow on yesterday’s selling, which is why I believe it was profit taking. Most of the “Big Boys” were out on Friday and Monday… So when they came back and saw the levels, they said, “By Joe, let’s take a profit or two”!

The only currency to see more slippage was the Japanese yen (JPY), with a little slippage from Swiss francs (CHF), as stocks were back en vogue yesterday, and thus the carry trades were back at work.

And the yen’s losses weren’t just against the dollar. Yen is losing lots of ground to the euro again. The losses to the euro had stopped for a while, but they are back!

So… The bad earnings reports of the past 10 days are swept under the rug, eh? Let’s go buy stocks again, the coast is clear! UGH!

Gold saw an end to its rally yesterday too, with a $14 sell off… UGH! The gold sell off also coincided with a big drop in oil price the past few days. Of course, the oil price sell off is the only “welcome” price drop! Oil has dropped from $135 last week to $127 this week… I guess maybe someone in the oil biz got the memo that U.S. drivers are putting the brakes on and not driving so much. Who can? Not with gas prices around $4!

OK, I know that those that own Prius cars can, but you are a very low minority of drivers…

In Germany this morning, we’ve seen some data that should keep rates right where they are if not eventually push them higher. I’m talking about inflation data. Five of the six German regions have reported higher inflation this morning – which points to an increase of 0.06% month-on-month. The consensus was for an increase of 0.04%, so this upside surprise reverses the sharp fall we saw in April. I knew that the April number was questionable.

Norway’s Norges Bank is expected to leave rates unchanged this morning… However, with oil prices being what they are, I expect the Norges Bank to revisit the rate hike table this summer… And that thought should underpin the krone (NOK).

Fed Head Fisher, one of the two dissenting votes of the last rate cut, will speak today. He will speak on “inflation and debt”. This ought to be interesting folks.

Today, we’ll see the color of the U.S. April durable goods, which is not expected to be a “warm and fuzzy for the economy” data print. The forecast is for a decline of -1.5%… But, hear me now and listen to me later… If the print is really this bad, the media will sweep it under the rug, or spin it to sound like good times at Ridgemont High!

So… There you have it! The currencies are drifting about, and are waiting for new signs to give them direction. With that, we’ll head to the Big Finish.

Good day… And a Wonderful Wednesday to you! Well… My first day at the Las Vegas Money Show went well. This place (Mandalay Bay) is so big and spread out; there’s just too much walking for me. My presentation went well, I think; it’s just too difficult to tell anymore for me.

Front and center this morning we have the government telling us that inflation was less than forecast last month. Just who do they think they’re kidding here? I didn’t just fall off the turnip truck! CPI rose 0.2% versus 0.3% forecast, putting the annual rate at 3.9% versus the previous 4.0%… Just doesn’t sit well with you does it? Oh well… We carry on despite the dolts we have to work with!

Another piece of data already out this morning has foreclosures in the United States climbing 65% in April, and bank seizures more than doubling in the same period. RealtyTrac Inc. said this morning that there are more than 243,300 properties, or one in every 519 households, that were in some stage of foreclosure, which happens to be the highest monthly total since they began to keep the data!

Oh, but don’t worry about all of this folks… Fed Chairman Big Ben Bernanke says the worst of over! And before I get away from all this, Freddie Mac, the second largest mortgage finance company, posted a $151 million first quarter loss… And… I would bet they “fudged” the numbers to make them look “this good”!

I shake my head in disgust of the stuff we have to deal with… The lies, the cooked books… UGH!

Alright, I’m back now… I was away for a minute to yell at the walls!

The softer inflation data this morning is allowing the euro (EUR) to gain some ground versus the dollar, as the market puts the Fed warnings of rising inflation and eventual rate hikes in the United States on the back burner.

Yesterday, we saw the euro lose a little ground after Fed Head Janet Yellen was wishing, and hoping and thinking and praying that the economy would be strong enough to raise rates. Oh give me a break! She’s grasping at straws! Yellen stated that she “would be pleased” if the economy was strong enough to raise rates by year-end. That’s all nice and sweet, Ms. Yellen… But did you realize you would move the markets with that “wish upon a star”?

Our friend, Jim Rogers, is back in the news today talking about the dollar rally. Let’s listen in…

“The dollar is going up, which is useful for people who want to sell the dollar down the road. With things the way they are, I would rather buy the Swiss franc and Asian currencies.”

Jim Rogers was also of the thought that carry trades are going to be reduced…

I’m all about this, and agree with our friend… This is the stuff I pound out on the keyboard almost every day. The carry trade is a “risky trade”, and when risk enters the markets in a big way, like I believe it will this year, the carry trade will be unwound, thus benefiting Swiss francs (CHF) and the low yielding Asian currencies.

Last week I told you about the Chinese renminbi (CNY) and how it had stalled at 6.98. There was a report this morning that Central Bank Governor Zhou signaled that slowing exports would see an easing in the pace of renminbi gains. If you recall that talk last week that I gave, this is what I was talking about… Slowing gains in the renminbi, (as if they weren’t slow enough already!)

The Canadian loonie (CAD) is knocking on the door to parity with the dollar again this morning, as it swaps places with the Swiss franc, which was at parity last month but has fallen back.

The Japanese yen (JPY) is getting sold again. This is a back and forth tug-o-war with yen… But in the long run, I still see yen gaining versus the dollar… But we’ve got to get that stupid carry trade off the books first!

One currency that has remained pretty “steady Eddie” during this recent dollar strength is the Brazilian real (BRL)… Of course I just put the “Chuck’s kiss-o-death” on the real… Anyway… I was talking to a customer yesterday here at the show, and listed the positive balance of payment currencies from Norway (NOK), Sweden (SEK), Switzerland, euro, Japan, and Singapore (SGD) as currencies an investor should look to. But added that Brazil and Australia (AUD) have the “things” the world needs, and should keep these currencies underpinned…

Currencies today 5/14/08: A$ .9350, kiwi .7630, C$ .9995, euro 1.5470, sterling 1.9445, Swiss .9485, ISK 79, rand 7.6550, krone 5.07, SEK 6.0150, forint 161.50, zloty 2.1920, koruna 16.15, yen 105, baht 32.40, sing 1.38, HKD 7.8, INR 42.45, China 7, pesos 10.50, BRL 1.6665, dollar index 73.31, Oil $125.37, Silver $16.89, and Gold… $870.20

That’s it for today… The BIG GUYS from Jacksonville were in town and came to my presentation yesterday. That was pretty exciting for yours truly. Since I got sick last summer, I haven’t had much opportunity to be around the Big Guys from Jacksonville (the home office), and just talk to them, etc. So, that was good… We also have two of our NY Operations people here with us at the show… Rachel and Tom are doing great! And Kathy from Jacksonville is also here, so we’ve got plenty of help. I go back to the days when it would just be Chris Gaffney and I all day at the booth… Chris is on his way to Panama this morning… Better him than me, that’s all I can say! I hope you have a Wonderful Wednesday!

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Source: More Bad Data for the U.S. Economy

The Jobs Jamboree… Can you believe that so much attention and drive to the markets is tied to this?

The dollar is a bit softer this morning going into the Jobs Jamboree, and rightly so, given the forecast. However, the dollar is still swinging a mighty hammer and I’m a bit perplexed by this. Last night I was up late (for me) and decided to put down some thoughts that were bouncing around in my head.

Well… How about that U.S. dollar? That’s some currency, Rudy! Why, look at it rallying against the euro (EUR) and other currencies as if it’s on a mission from God! It looks as if the United States has turned things around. The deficit no longer needs to be financed with over $2 billion a day in foreign investment… Interest rates are where they need to be to fight this soaring inflation… The government has stopped spending wildly, and the budget is balanced… The mortgage lenders have recovered all of their losses… There is no longer a credit crunch… And finally, the war is the Middle East is over.

But Wait! Unless I pulled a Rip Van Winkle and slept through all of that… These things haven’t happened, nor do they look as though they might begin to happen any time soon! So, what the heck has the dollar bulls dancing in the streets swinging a mighty hammer?

You’ve got me on this one. Folks, for once, I’ll admit that I have no idea what the heck is going on here… Serenity Now! Is this the pullback in the euro that I said we should look for in January, but never saw? If so… When will the tourniquet be applied to this gushing wound? Hmmmm… Good question! And I don’t have an answer to that either! I thought back in January when the euro was around 1.45, that we could see it fall back to 1.40, before moving ahead again… But that never happened. Instead we saw the euro climb to 1.50, then 1.55, then 1.60 in a little over three months time. Was it too quick? Is that what we’re seeing, merely a technical correction? Or is there something else in the works here?

Again… I don’t know the answer… But I’m hoping that in the days to come, it becomes apparent, and when it does, I’ll be Johnny on the Spot in reporting it to you! (Notice I said, “I’ll be Johnny on the Spot”, and not I’ll be “A” Johnny on the Spot! HAAHAHAHAHA)

This dollar rally has got the “naysayers” coming out of the woodwork too. Oh, the whole lot of them are pointing fingers and claiming they knew the dollar was undervalued, and blah, blah, blah… Where were these guys when the euro hit 1.60 about 10 days ago? They were hiding under the sheets!

Forgive me for this but this reminds me of when I coached my darling daughter Dawn’s girls softball team. The girls would do these chants on the bench that drove me nuts! But there was one that would just make me want to scream! We would be getting beat unmercifully, and the girls would be chanting something that ended with, “We can beat your team any old time.” UGH! But that’s what the naysayers are reminding me of right now. They are chanting about the dollar, when it has gotten beaten unmercifully for six years.

OK… Onto other things… The U.S. ISM Manufacturing Index remained well below the 50 level for the third consecutive month. I saw a news story yesterday where the writer was seriously talking about how Manufacturing will pick up due to the stimulus checks, as the receivers of those checks go out and spend them. Folks… The writer was serious…

I’ve told you over and over again that these stimulus checks might get spent by some… But I don’t see the checks getting spent by most. Instead, I see them using the money to pay down a credit card, or some form of debt, as the past couple of months has been quite sobering to the U.S. consumer.

Hey! You’ve got to feel good this Fantastico Friday, as U.S. Treasury Secretary Paulson is telling anyone that will listen, that we are “closer to the end” of the credit crisis. Oh, now that gives me a warm and fuzzy, given his track record of spouting off stuff like that in the last year!

I’ll bet him a shiny quarter that we’re only halfway through the credit crisis! The Bank of England (BOE) said yesterday that they feel as though the “worst is over” . Hmmm… Maybe these guys know something I don’t!

Down Under in Australia, retail sales surprised on the upside, printing at +0.5% versus the +0.3% that was forecast. Retail sales account for 40% of private consumption, which in turn accounts for around 60% of GDP… So this is important data for the Reserve Bank of Australia (RBA). The RBA will not need any excuses to keep rates at current levels given the strength of this data… And that thought should be a good underpinning for the Aussie dollar (AUD).

The U.S. stock market has been on a feeding frenzy since the rate cut on Wednesday. All this euphoria in stocks has the carry trade going great guns once again… This is being reflected in the price of yen (JPY) and Swiss francs (CHF)… I just don’t see how this can continue to go on and on and on. The carry trade has longer lasting power than the Energizer Bunny! But one day, it will all come crashing down like a house of cards… At least that’s my opinion.

There was another story yesterday about the Gulf States ending their dollar peg. This is getting out of control! About every three months these guys get together and make big plans to drop their dollar peg, and the media goes hog wild over the story. Shoot Rudy, I used to get all caught up in it too until I realized they were just being the boy who cried wolf.

Good day… And a Marvelous Monday to you! Two of three from our second most heated rival, the Astros, makes for a good weekend at the Butler House! Should have been a sweep, but I won’t get greedy! The currencies in the overnight market have started to show some healing from last week’s meltdown… So, let’s get to it!

First off, front and center this morning, the euro (EUR) is leading the pack (vroom, vroom) this morning after rallying all night in Japan, and now Europe. I was talking to a trader from a BIG BROKERAGE HOUSE the other day, and I mentioned that I had seen plenty of stories in the past few days that made it sound as if the markets had changed their mind regarding a Fed rate cut this week. The trader mentioned that the percent of those polled thinking there would be a cut had fallen during the week, but was still around 75%.

I really thought at that time that the fall from the high 90% thinking there would be a rate cut to 75%, probably had a lot to do with the dollar rally last week. I still think that’s the case. One of these days we’ll see Big Ben change his tune on rate cuts to appease the markets, and affix his eyes on the inflation balloon that is now hovering over us. I even heard some dolt on our local radio station yesterday tell the audience that “inflation isn’t a problem”. HAHAHAHAHAHA! You should have heard me yell at the radio!

The dollar has two items hanging over its head like the Sword of Damocles this week… First, the Fed meeting on Wednesday… And Second, the Jobs Jamboree on Friday. We’ll be into May by then and the dollar bulls might be yelling “May Day” once that Jobs report prints on Friday, given the forecast right now stands at a negative -78K.

So… Who’s mast are you going to pin your colors to this week… The dollar’s…or the euro’s?

OK… Long time readers know how I continue to believe that the balance of payments is going to continue to weigh on the dollar. I tried to make this point on CNBC but they would hear nothing of it… So, instead I turned to my Pfennig readers, of which, there were probably more reading what I wanted to say than people watching CNBC! HA! (I jest, I know better!)

Well… Wanna see something that really plays well with my thought that the financing of the deficit is going to be the biggest problem for the dollar? Japan owns more Treasuries than any other nation. After raising their holdings by $9.2 billion to $620.6 billion between March and July 2007, Japanese investors trimmed that stake by $34 billion through February, the U.S. Treasury said April 15. And why not? The Japanese just posted a 7% loss on their Treasury holding in the last quarter!

So… The “pain meter” for the dollar just went up a few notches… As the story on the Bloomie said… “Add another ailment to the U.S. misery index of soaring gasoline and wheat costs and falling home values: a Federal Deficit that’s is burgeoning as foreign investors led by the Japanese recoil from the slumping dollar.” Couldn’t have said it better myself!

This is scary stuff folks… I don’t mean to cry wolf here… But it’s something to keep an eye on. This is a scenario that I’ve explained over and over again the past few years… That it was something back in the deep dark closet of scary things for the dollar. I don’t think that it has been dragged out of the deep dark closet just yet, but it has moved closer to the closet door.

On Friday, we saw a little bit of healing in the currencies after the U. of Michigan Consumer Confidence Index fell to it’s lowest level since 1982 in April. This was alarming, given the fact that the “experts” had thought the report would not show additional weakness from the previous reading. The 53.3 index level is firmly in the range that is historically associated with a recession.

I had two radio/podcast interviews on Friday… Since I have the face for radio, the PR people are lining the interviews up for me… I like these, because the interviewers let me talk… Too bad they have just regional reach.

OK… Besides the Fed meeting – which by the way is a two-dayer – what these guys do for two days, besides playing Battleship or Risk is beyond me! OK, back to what I was talking about, besides the Fed meeting, and the Jobs Jamboree, this week is chock-full-o-data, that will probably really weigh heavily on the dollar. Here’s the roster o-data…

Tomorrow we get to see the color of the latest GDP report for the first quarter (should be an anemic 0.4% growth, which without Government spending (we are fighting a war) would most likely be very negative. We’ll also see personal consumption, which the Fed looks at for signs of inflation. (I think they need another barometer… It’s called the Pfennig!) We’ll see the Chicago Purchasing Manager Index (manufacturing), and then two of my faves, personal income and spending.

On May Day, we’ll see the latest ISM Manufacturing Index, which is expected to remain below the contraction line of 50. There are other second tier reports sprinkled throughout the week, so it’s not going to be an easy week for the dollar, as it was last week!

With the dollar weakness overnight, gold has bounced back over $5. Oil has pushed back to within spittin’ distance of $119. Could this be the beginning of the next leg up for the commodities against the dollar? Don’t know the answer to that question… But figured it was worth everyone taking a moment to think about it.

One currency that’s not following the euro higher this morning is Japanese yen (JPY)… The Bank of Japan (BOJ) is expected to lower its growth projection for the current year when it releases its twice yearly outlook on the economy this Wednesday. In addition, the BOJ will most likely leave rates unchanged at the meeting on Wednesday. I think that yen gets more play in the carry trade than it does on its own data. And so it goes with yen… I still fully expect it to recover this lost ground and get back to 100 and beyond, but it will require a risk event to play out, that unwinds carry trades again.

In New Zealand, could the trade deficit finally be getting some relief? The February report showed a trade surplus for the month, at NZ$ 258 million. The March report will print tonight and is expected to be an even larger surplus number! WOW! New Zealand turning the tables on their HUGE deficit? Well… That would be grand! But, they’ve got a hard row to hoe with getting their trade deficit straightened out. But these monthly surplus reports are certainly a step in the right direction!

Good day… And a Tremendous Thursday to you! Well… Euro 1.60 (EUR) didn’t last long. More on that in a minute… But first we need to address the question of whether or not the euro hitting 1.60 was a flash in the pan. I certainly don’t think so, but it sure looks as though that could be the case given how the single unit has tumbled since reaching that level on Tuesday.

So… There were lots of reasons for the euro’s decline yesterday… But the infamous straw for the euro seemed to be the German Business Confidence report as measured by the think tank, IFO, this morning. German Business Confidence – which had surprised on the upside the past three months – came out softer than expected in April, falling from 104.8 in March to 102.4. That was quite a tumble in business confidence, and apparently wipes out the previous three months of stronger confidence. It’s a “what have you done for me lately” world out there folks.

So, is this the mini-sell off I’ve been talking about since January? Could be… I had a sneaky feeling yesterday, so I asked my chartist friend what he was seeing. Here’s what he had to say…

“As far as the euro, I’m not seeing anything too exciting. There are some signs that it may be overbought in the short term. The weekly chart is absolutely beautiful (movement from lower left to upper right), but it is also showing that we may be due for a slight pullback (buying opportunity.)”

Risk appetite is really taking flight again in the markets, but I just can’t get my arms around this willingness to take on risk. There are just too many “risk events” out there (like Bear Stearns) but, that’s just me, apparently, the markets don’t think this way. And with the risk appetite on the rise, the fortunes of Japanese yen (JPY) and Swiss francs (CHF) are on the opposite side of that rise.

Here we go again… Investors taking on risk like there’s no tomorrow. I sure hope, for them, it doesn’t end up in smoke… But I have to think that it will. My chartist friend also had this to say about risk right now…

“What I am more excited to share with you is what is going on in the whole Risk vs. Risk Aversion Arena. As you have pointed out many times, the stock market and the high yielding currencies represent Risk. The Yen and Franc represent Risk Aversion. So, what does that mean?

“If you look at the stock market (S&P 500), there is major overhead resistance in the 1380-1400 area. We are currently in our fourth retest of this 1380-1400 area and we appear to be failing yet again. Each failure drains the confidence levels of investors, so we could be setting up for some dramatic downside movement. If this happens, then Risk will be on the run, which will mean Risk Aversion (Yen and Francs) could see some much needed love. Both of these low yielders look to be primed for strong moves upward.”

Theswoop.net had this to say about what’s going on with the Fed, their collateral for loans, and everything else that I’ve yelled at the walls about recently…

“The issue here is uncertainty. Despite some signs that the worst of the banking crisis may be past, officials from the Treasury and Federal Reserve concede in private that, with regard to certain complex financial products and relationships, their knowledge is imperfect. ‘The truth is,’ one Treasury official told us, ‘we don’t have a clue.’”

Oh my gosh! Did shivers just go down your spine when you read that? “We don’t have a clue”? The old saying about the inmates have taken over the jailhouse, comes to mind right now.

Are you keeping on top of the news of the rationing of rice? Brazil suspended their rice exports to protect their supply for domestic demand. I saw on the TV yesterday, a news story flash across that Wal-Mart and Sam’s Club are rationing rice. Yesterday, Chicago rice futures hit a record price above $25 (per hundredweight). And in Thailand, the world’s top exporter of rice, the price surged to $1000 a ton.

Right here, right now, in the U.S. of A. we’re rationing rice. Can you believe that? There are underlying stories woven into this that I won’t get into, but for now… We have this to think about… We have rationing in the United States.

So… The dollar is on the rise… The only good thing about that right now is the fact that when the dollar rebounds, the price of oil goes down. This all looks as though it’s a house of cards to me… But, give the dollar it’s due… I’ll bet a fiddle of gold, against your soul, ’cause I think I’m better than you! I have no idea where that came from, but Charlie Daniels in the morning ain’t too shabby!

You know all this talk lately by G-7 ministers claiming that the markets didn’t understand their Forex message? Well… The Bank of Canada’s (BOC) Flaherty said yesterday that G-7 did NOT have discussions about currency intervention.

See! I told you so! I told you that the markets wouldn’t take G-7’s message seriously, unless there was a threat of coordinated intervention… And that, I just didn’t see coordinated intervention in the cards, not as long as the United States is still banging on China to let their currency gain versus the dollar. And now, we know! There was no discussion of intervention!

That’s an “all clear” horn for currency participants… I guess they are now waiting for the bargains to appear.

The Reserve Bank of New Zealand (RBNZ) left rates unchanged last night. I didn’t expect any movement, and quite frankly had forgotten all about the meeting. Good thing they didn’t spring any surprises on me/us, eh? Here’s RBNZ Governor Bollard…

“Economic activity has weakened more markedly than expected in the Bank’s March Monetary Policy Statement. There have been sharp falls in consumer and business sentiment, exacerbated by tighter credit conditions, a further decline in the housing market and weaker prospects for world growth. Financial market turbulence around the world continues to add to an uncertain economic environment. Further, the very dry summer is also weakening short-term growth prospects.

“However, the labor market is still strong and New Zealand’s key international commodity prices remain high. Government spending plans and the possibility of personal tax cuts can also be expected to limit the economic slowdown.”

Good day… And a Terrific Tuesday to you! Front and Center this morning, we have the euro (EUR) attempting to reach 1.60 again. I know I gave the euro the Chuck Kiss of Death last week when I sang the praises of it reaching 1.60, so I’ll just let it fly under the radar this morning.

Yesterday when I signed off, the euro was pushing the envelope of 1.59. Later in the morning, ECB member Weber sounded off on inflation. Let’s listen in…

“EUROZONE INFLATION IS WELL ABOVE ECB’S TOLERANCE THRESHOLD”. WOW! And then he followed up with this… “ELEVATED INFLATION EXPECTATIONS COULD START WAGE-PRICE SPIRAL, CREATE SECOND ROUND EFFECTS, AND THE ECB WILL DECISIVELY AND ACTIVELY FIGHT RISK OF WIDESPREAD SECOND-ROUND EFFECTS”.

Now, that’s two consecutive days of ECB members talking hawkish… First Liebscher and now Weber, with Weber’s comments sounding more and more like there’s another rate hike up the ECB’s sleeve. At best, the ECB doesn’t sound like they are ready to CUT rates any time soon… So, the euro gets to hold on to its positive interest rate differential to the dollar… And so… The single unit heads higher.

You know… I really didn’t like the Fed bailout of Bear Stearns; I’ve chronicled that position here in the Pfennig… But the markets took the bait, hook, line and sinker… And for now, at least, there’s more calm in the markets and probably more since last August. I’ll tell you why I think that…

The stock market, seems to believe better times are ahead, and that risk aversion is no longer needed… (Yes, I’m aware that it sold off yesterday)… And then there was this story that flashed across the screen this morning… Interest in placing puts on Aussie dollars has dropped to the lowest level since last August. For those of you new to class… When someone places a put on an asset, they believe it will fall in price… They get to sell it at the price they placed the put on, and everyone’s happy, the peasants dance in the streets, and Marie Antoinette gets to eat cake.

Back to reality… So… With investors/traders no longer thinking that the Aussie dollar (AUD) had reached its high… Guess what? The Aussie dollar is going higher! Amazing! Truly amazing how that works! HAHAHAHAHA! And remember it was months ago, that I said that the Aussie dollar looked like it would reach parity, along with Swiss francs? Well, the Swiss franc (CHF) did it, and so can Aussie dollars!

However, the road to parity is full of potholes, much like the St. Louis roads after an awful winter! And the biggest pothole is the one that contains risk events. You know, risk events, like Bear Stearns… I’m still a believer of the thought that there will be more risk events this year. Look at these earnings that the Big Boys have been posting in the last week… Yesterday, Bank of America posted a gain in the last quarter, but it was down 77% from the previous quarter! I sure wouldn’t want to be the one responsible for explainin’ that to the shareholders!

The Wall Street Journal is reporting this morning that loan losses pose a potentially larger threat to more banks than the losses taken so far.

Today, we’ll see the color of the latest Existing Home Sales report here in the United States. The experts tell us that we should expect to see more rot on the vine here, with sales forecast to drop 2.3% to the $4.92 million annual rate, the lowest level since 1999. This is a pothole, and it could become an even bigger pothole, should the drop exceed the forecast. This housing meltdown has been something to behold… Most of the younger crowd has never seen this before; they were always told that their house would keep going up in value.

The Bank of Canada (BOC) meets today, and I’m expecting a large cut from them to keep pace with the U.S. Federal Reserve – 50 BPS, which should put some deep tissue pressure on the Canadian dollar/loonie (CAD). This is what I’ve been talking about with regard to the loonie…  Downward pressure applied from the BOC and their rate cuts, and upward pressure applied from commodity prices… Today, it looks like the rate cuts will have the upper hand, eh?

About a month or so ago, Goldman Sachs forecast a rate cut in Japan, which really hurt the yen (JPY) when it was trading around 100. Goldman Sachs has abandoned that call now… Hmmm… This sounds fishy to me. You don’t think that the Bank of Japan (BOJ) talked to Goldman… Nah… That’s too far fetched for even my conspiracy-laden mind! But maybe a screenwriter would like to make a movie from my thoughts? HA!

It will be interesting to see if Japanese yen can get back on the rally horse now… Of course we need for the carry trades to stop to see real gains here. And, as I said above, I still believe that we’ll see more risk events this year, which should put a real damper on the carry traders.

Two of my fave currencies keep pushin’, keep pushin’, keep pushin’ onnnnnn… There you go, a little REO Speed wagon to get your blood going this morning! OK, now back to the currencies of Norway (NOK) and Sweden (SEK)… Have you seen these two lately? WOW! The moves this year have been something to behold.

I have an acquaintance that’s an oil man. Every time I see him, he’s smiling like a Cheshire Cat… Well, I’m sure the oil people in Norway are smiling the same way! With oil hitting $117 and change yesterday, oil revenues are pouring into Norway, thus padding their positive balance of payments and removing their need for foreign capital. Notice, that we’ve not discussed any Norwegian Banks or Swedish Banks involved in the subprime write-downs?

Norway’s Norges Bank meets tomorrow, and I’m expecting the Norges Bank to hike rates 25 BPS tomorrow. This should help propel the krone even higher.

As I’ve told people for many years… When evaluating a currency, first look at its position in the world… Then think of the currency as the stock of that country, and evaluate it like you do a stock. What’s the yield? What’s the flow of investments? What’s the balance sheet look like? What’s the leadership like? Etc. etc. When doing so, you’ll find that it makes it an easier decision for you… And when you do this for Norway, or Sweden, you’ll find stocks that you would probably want in your investment portfolio.

Wouldn’t you know it? I come in, see the euro pushing the envelope of 1.60, and by the time I’m ready to go the Big Finish, it sells off, making what I wrote earlier look like I’m delirious! Oh well… I carry on, despite my challenges!

I’ll finish with the thought that what I explained about two years ago, regarding the Asian currencies is really taking hold these days. Japan, China, Singapore… All are seeing their currencies strengthen versus the dollar, and that’s good, and about time too!

You see… Inflation is really getting to these economies, and at least they understand that a stronger currency can help fight inflation. Ahhh… They Got The Inflation Memo!

Currencies today 4/22/08: A$ .9440, kiwi .7965, C$ .9930, euro 1.5940, sterling 1.9880, Swiss .9920, ISK 74.20, rand 7.6810, krone 4.9730, SEK 5.87, forint 158, zloty 2.14, koruna 15.72, yen 103.20, baht 31.48, sing 1.3510, HKD 7.7955, INR 39.95, China 6.9880, pesos 10.51, BRL 1.6640, Oil $116, Silver $17.61, and Gold… $921.45

That’s it for today… Hey! Did you see the nice story in the St. Petersburg Times this past weekend? The writer, Helen Huntley, came to see me when I was in St. Pete, and wrote a great piece! Now… The photo is a little old… I haven’t worn that tie in two years! Anyway… Great stuff! In case you missed it… Here’s the link…

The rain is back today. I’m guessing the water table here in the Mid-West is doing quite nicely! Time to eat my apple! I sure hope you have a Terrific Tuesday!

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Good day… And a Happy Friday to one and all! An All Shook Up Friday for us here in the St. Louis region, as we experienced an earthquake this morning registering 5.4 on the Richter Scale. My house started shaking, and kept shaking, which led me to believe it was more than wind. The house was shaking so bad, it woke up my beautiful bride… Which isn’t something that’s easily done! Especially at 4:30 AM!

But, it looks as though all is right on the night, the earthquake was centered 127 miles east of St. Louis. As you all probably know, here in St. Louis, we keep the New Madrid Fault in the backs of our minds, and drag it out whenever we feel the earth move under our feet.

Well… European Central Banker, Juncker tried to “shake” up the currency markets yesterday with some comments about G-7. As I’ve said two times this week, I was afraid the markets didn’t understand the G-7’s comments about the currencies, and that thought was repeated by Juncker yesterday, as he said, “the markets did not correctly understand the G-7 message on FX”.

So, that was what put a bug in the bonnet of the euro (EUR) yesterday morning as I was signing off. And that carried through to the Asian markets last night… But, we’ve seen this before, right? Just a few weeks ago, we experienced euro weakness, but that bad “air” soon dissipated… And I would think this would too.

It all depends on the market participants and their will to push the envelope with G-7. If it were me… I would push the envelope and call their bluff. I truly do not believe a coordinated intervention will take place, for to do so, would require the United States to join in… And here’s where the oil in this machine gets all sticky. How can the United States intervene and buy dollars, when they keep harping that the Chinese renminbi (CNY) needs to get stronger versus the dollar? They can’t… If they did, the markets would take them to the woodshed… And the U.S. officials know that.

We had Fed Head Fisher our on the speaking circuit yesterday, and his comments also helped the dollar rebound. Fisher was talking “some sense” (believe or not!) on the subject of “attempting to inflate away the Financial System’s woes”, saying, “there’s danger of a wing-and-prayer promise to rein in inflation later” and then the fateful, “I maintain a strong reluctance to further interest rate cuts”.

Well… The problem here is that Fed Head Fisher is a Lone Ranger. Big Ben doesn’t share his thoughts, and when the Fed meets later this month and cuts rates, Fisher will probably be the lone wolf on dissenting.

So… After all this, the euro still has the dollar by the tail, as it maintains a strong base above 1.58… Of course, now that I’ve said that, we’ll probably see it fall further! UGH! The Chuck Kiss of Death or as in honor of my friend the Mogambo (TCKOD).

Well… The U.S. data yesterday showed more signs of recession, with the Weekly Jobless Claims jumping up to 372K from 355K the previous week. But the piece of data that really barked like a recession was the Philly Fed Index (manufacturing), which collapsed this month and fell from -17.4 to -24.9. This is the lowest level since January and February 2001, as we entered the last recession. Data back to 1968 shows that declines in the index below current levels has been consistent with recessions.

Of course you, a Pfennig reader, knew we were in a recession months ago, because I told you so! I bet you used that information as “cocktail trivia” to sound smart! Good for you! That’s they way more people see the “light”.

Alright, I went off on a tangent there… I’m just kidding you know… It’s just my nature to have fun!

So… The fundamentals haven’t changed. The U.S. deficit is soaring higher and higher, requiring us to attract more and more foreign investment… The economy is in a recession… Jobs are hard to find… House prices are falling… And we’re still fighting a war! Does this sound like the stuff that a stronger currency is made of? I don’t think so! So… If this isn’t a trend reversal, what is it? Ahhh grasshopper, it’s simply profit taking and the scared Nervous Nellies who are selling. It sure does give us some cheaper levels to buy euros, eh?

Not just euros… The whole cellblock is dancing to this jailhouse rock… So, if you can’t find a partner to dance with, grab a wooden chair! In other words… Find your fave currency and most likely it has been dancing to the jailhouse rock, and is now at cheaper levels than even earlier this week!

One currency that sat out the dance overnight was pound sterling (GBP). In fact, pound sterling has rallied on comments from the Bank of England (BOE). BOE member, Bean, tried to calm the fears of a huge sell off of pound sterling. Bean commented that the stimulus from GBP’s fall from the peak is roughly equivalent to a rate cut of 3% points and that GBP’s fall since August was “of the same order” as the fall after the ERM crisis in 1992.

All a bunch of rubbish to me… But it calmed the fears for a day at least!

Man… Did you see the awful earnings report by the brokerage that owns a Bull? In case you missed it… $1.96 billion net loss, with $9 billion more of mortgage-related write downs. I’m not picking on Merrill here, just posting what I believe will be more damage to the economy… This morning, Citigroup, posted an even bigger loss. Citigroup Inc. reported a net loss of $5.1 billion, and more than $10 billion in write-downs.

And… These reports lead one to believe they should buy dollars? Hmmm… If so, I’ve got some land.

Stocks were no great shakes yesterday, but at least they didn’t sell-off. So, that means the carry trade remains in place, and the weakness of Japanese yen (JPY) and Swiss francs (CHF) remain in place, while Aussie (AUD) and kiwi (NZD) are looking good! And always I tell you that it is better to look good than it is to feel good my friend!

There’s no data today in the United States so… It would appear that the dollar will end the week on an upbeat note. That’s OK… Even a blind squirrel can find an acorn!

Currencies today 4/18/08: A$ .9375, kiwi .7905, C$ .9925, euro 1.5845, sterling 1.9975, Swiss .9835, ISK 75.65, rand 7.76, krone 5.01, SEK 5.9285, forint 159.75, zloty 2.1560, koruna 15.81, yen 103.25, baht 31.44, sing 1.3530, HKD 7.7925, INR 39.93, China 6.9935, pesos 10.46, BRL 1.6540, dollar index 71.80, Oil $114.15, Silver $18.05, and Gold… $934.50

That’s it for today… So… Shake me, wake me, when it’s over… I thought of that great old Four Tops song, on my way to work this morning. Geez Louise, my poor face got fried yesterday at the ballgame… Good thing I had a ball cap on to protect my bald head! I was hoping last night that the red on my face would fade… But as I looked in the mirror this morning, my face is even redder! OUCH!

HEY! Sunday is the Big Boss, Frank Trotter’s birthday! Frank and I have worked together so long, that he was a young man when we started! In fact… The Dead Sea wasn’t even sick yet! That’s how long we’ve worked together! His beautiful daughters are all grown up now, I held them as babies! So… Happy Birthday, you youngster! (Frank’s 1 year older than me, so as long as I keep calling him young, I’m younger!) I hope you have a Fantastico Friday!

P.S. To get The Daily Reckoning sent directly to your inbox, sign up for our free email newsletter, or if you prefer to use RSS, subscribe to the Daily Reckoning RSS feed.

Editor’s Note: Chuck Butler is the senior vice president of EverBank World Markets. He oversees the trading desk and operations for over 12,000 individual and corporate clients, both in the United States and abroad, who look to EverBank for FDIC-insured World Currency Deposit Accounts, and Single-Currency and Index CDs .

Good day… And a Tub Thumpin’ Thursday to you! No earth shattering moves in the currencies overnight like yesterday morning, so we’ve got that going for us! Hey! I heard from my friend The Mogambo Guru yesterday… He tells me that he’s doing fine, and that it was his third heart attack, and that he’s the proud owner of five cardiac stents now.

The Mogambo brings many smiles to yours truly, and the people on our trading desk, so that’s good news… Not that he’s had three heart attacks, but that he’s doing fine!

OK… Currency traders and participants tried to take profits yesterday, and some did, but the currencies, for the most part, remained range bound on the day, after the big move the previous night. Once again, stocks have rebounded the past couple of days, and that has put carry trades back on the table. And, we all know what that means, right? Yes, that means the low yielding currencies get sold (read Japanese yen (JPY), and Swiss francs (CHF)) and the high yielding currencies get bought (read Aussie (AUD), kiwi (NZD), and even Iceland (ISK)). This carry trade has had more comebacks than a retired heavyweight boxer!

Yesterday, we saw U.S housing starts continue to collapse when the March reports printed. Both housing starts and building permits showed a 59% fall from the high two years ago. Let me put this in perspective… In previous crashes, the decline from peak to trough has been 40-60%, so we are on the verge of breaking all records for a down-move. Nice to know that the men put in place to protect the economy, thought this meltdown had “bottomed” last August, eh?

After the report, Reuters reported that Fed Head Mishkin, was overheard saying, “THERE IS ROOM TO LOWER FEDERAL FUNDS RATE IF NEEDED”… This is what I’ve been talking about folks… The U.S. rates are going lower, and you can take that to the bank! OK, well… Maybe the legal beagles won’t like me saying that, so, let’s just say, I think that you should think that U.S. rates are going lower.

And rates in the Eurozone, Norway, Sweden, Australia, and New Zealand are remaining unchanged… And in some cases may see additional hikes.

Well, the high price of oil, has finally pushed across to consumer inflation… (Of course you and I know it already did, but the stupid CPI report is just now showing it, but not much of it!) CPI pushed higher in March to 4%, which is exactly where the “experts” forecast it to come in. You’ve got to love it when a plan comes together, eh? Of course over at the Shadow Stats, John Williams, has calculated consumer inflation using the 1980 methodology, and shows inflation much higher. Can you say, 12%? I knew you could!

You know me; I’m such a nut over inflation that this kind of information just gets me so riled up and yelling at the walls! Why will no one that’s running for President talk about this? Because… That would not make you “feel good”, and you sure wouldn’t vote for someone that didn’t make you feel good, right? Well, that’s what they think! Oh… And price of oil went up again yesterday, to $115! OUCH!

So… Remember when the euro (EUR) banged around 1.48, it seemed forever before finally moving past 1.50? I think it’s doing the same thing now, hanging around 1.58-59. 1.60 is a HUGE psychological level, so when it hits it, it could bounce back and forth as black box trades are executed… But think about that for a minute… 1.60 for the euro is practically double what it was in 1999/2000… Unbelievable! But… Look for some verbal intervention from the European Central Bank (ECB) at 1.60… Nothing serious, just some jawboning.

With every passing day, G-7 gets smaller in the rear view mirror, and their change of wording in the communiqué… Almost as though, it didn’t happen… But once again, I have the feeling that the markets just didn’t get what G-7 was saying… But talking the talk, without walking the walk isn’t going to get it done. In other words, they can talk about a stronger dollar, but unless they are willing to put some of their hard earned cash at work, intervening, I don’t think currency participants are going to pay attention.

The Canadian dollar/loonie (CAD) pushed past parity for the first time in a month yesterday. It’s back below this morning, but this move yesterday illustrates what I’ve been talking about for a month or so… The loonie has the commodities providing a floor, which will underpin the currency, while the Bank of Canada (BOC) cuts rates, keeping the loonie from going much higher. So… A trading range around parity is what I see for loonies for the time being.

I see by my trusty screen that shows me year-to-date returns on the currencies that the Swiss franc is still the best performing currency this year, followed by Swedish krona (SEK), Norwegian krone (NOK), euro, Danish krone, Japanese yen, Aussie, and kiwi… (G-10 currencies) I was asked last week to list my top six favorite currencies… So off the top of my head I said… Swiss francs, Japanese yen, Norwegian krone, Swedish krona, euro, Aussie… That’s pretty amazing that my top six is eerily similar to the official top nine.

I think if we could go back into the past, you would see that my top six hasn’t changed this year. A positive balance of payments goes a long way toward making a currency strong, and if you look, all of these have a positive balance of payments except Aussie.

The price of gold (and silver) surged yesterday after the housing starts report. Gold has been waiting for more “bad” news in the United States to move higher. I’m not suggesting here that gold will only move higher on “bad” news… But “bad” news does help put the focus back on gold, which is trading well below the $1,000 oz. figure it achieved last month. With inflation surging… One would think that would be enough for gold to move higher. We’ll have to see, eh?

Well… The euro has seen some selling since I came in this morning and started to write. Overnight it hit a high of 1.5985… But right now, before I head to the Big Finish, it’s barely holding the 1.59 handle. I don’t see any news on the euro that would explain this selling, so… We’ll have to keep an eye on this today.

Currencies today 4/17/08: A$ .9365, kiwi .7885, C$ .9975, euro 1.5910, sterling 1.9790, Swiss .9955, ISK 73.75, rand 7.8630, krone 4.9660, SEK 5.90, forint 158.90, zloty 2.1470, koruna 15.67, yen 102.25, baht 31.45, sing 1.35, HKD 7.7920, INR 39.91, China 6.9830, pesos 10.46, BRL 1.6640, dollar index 71.59, Oil $115.08, Silver $18.53, and Gold… $947.05

That’s it for today… The Big Boss, Frank Trotter was just on Fox News, Business for Breakfast. He was talking about Bank Earnings… I received a call from a guy associated with the Glenn Beck show yesterday. Apparently, Glenn Beck recently read Craig Karmin’s excellent book, Biography of the Dollar which features me in Chapter 6 – and after reading the book, Glenn told his producer to get in touch with me! WOW! First it was the NY Times Magazine, and now Glenn Beck, that found me in the book. Thanks again Craig! The producer said he wasn’t sure if I would be on the CNN TV show or Glenn’s radio show. I was quick to inform the producer that I have a “face for radio!” OK… Yours truly is sneaking out today to head down to the ballpark for an afternoon game Cards/Brewers. I love day baseball… To me, it’s when the game should be played! So… I’ve got to get going here… I hope your Thursday is Tub Thumpin’!

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