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Stubborn Euro Refuses to Budge

Chuck Butler (June 22, 2009)

Monday, June 22, 2009

(Even for Germany!)

By Chuck Butler I’m as proud as a peacock this morning.

I just read an email from good friend, and excellent market analyst, Mary Anne Aden. Mary Anne sent me a note letting me know that the one and only Richard Russell quoted me in his letter June 10th.

She said it went something like…”This is from Chuck Butler’s always terrific column…” Wow! Being quoted in Richard Russell’s letter?! That just made my day! (By the way, if you don’t know Richard Russell…he’s had his own financial newsletter for decades. Mr. Russell started publishing the Dow Theory Letters back in 1958!)

I can hear you thinking, “Okay, Chuck climb down off of cloud 9.” But seriously, get off of my cloud! Even the fact that the currencies and commodities sold off in the overnight markets can’t keep me off cloud 9 today…

Should Germany Continue to Improve…the Rest of
the Eurozone Will Follow

Okay, back to currencies. Yes, both the majority of foreign currencies and commodities sold off in the overnight markets.

Even a good print by Germany’s think tank IFO on Business Confidence, hasn’t wrapped a tourniquet around this currency sell off. This wasn’t a “one and done” for Business Confidence in Germany either! This happens to be the third consecutive month of positive gains for Germany’s Business Confidence numbers. Now you would think that this should signal something, right?

I mean, if I walked up to you on the street and said, “Germany’s Business Confidence has posted positive gains for three consecutive months”… You would probably, no wait, definitely think (because I know you’re very astute dear reader), that Germany’s economy must be coming out of their recession, right?

That’s what I would think. Since Germany is the Eurozone’s largest economy, I would also think that any positive news for Germany would push the euro higher. But the euro isn’t budging (at least not yet)!

I’m thinking we’ll probably see more signs of recovery the next time Germany prints their GDP numbers. In fact, I believe we’ll see a nice improvement from the previous quarter’s negative -6.7% decline. Now I’m NOT saying Germany’s GDP will turn positive next time around. But if it knocks out even half of its recent decline, that would show that things are improving.

And if things are improving in Germany, the rest of the Eurozone will grab onto Germany’s coattails!

Mark Your Calendars: The Fed Meets This Week!

The U.S. Fed meets this week in an otherwise quiet week for data. So we’ll have to see what’s up Big Ben’s sleeve right now…

I would suspect that this week will be a non-event. But in August, the Fed will most likely be setting off some late fireworks, with an increase in their bond-buying program. More Quantitative Easing…ugh!

Like I said, the data is pretty weak this week… So, we’ll be scratching and clawing for the markets to throw us bone.

Don’t Expect Much
from Ben This Week

Down Under… The Aussie dollar (A$) has taken on some water overnight after a story printed and quoted the Morning Herald’s economic editor. The quote went something like this…

“The market was wrong in discounting little to no chance of another RBA cut this year, and a high chance of a hike in the first few months of next year.”

You might recall last week I told you that Australia’s market had basically decided that the Reserve Bank of Australia (RBA) was done cutting rates. I then threw in my own 2-cents and said that the first rate hike would come in the first quarter of next year…

Well, the Economics Editor at the Morning Herald doesn’t agree. And the Aussie dollar has sold off big time since the paper hit the newsstands!

Now seriously, come on! That’s just one person’s opinion, isn’t it? Last week, the market players were all about the end of rate cuts. And they are now going to be swayed by one opinion? Where’s the intestinal fortitude?

Repo Market…Another Excuse for Fed Intervention

And then there was this… Apparently the Fed isn’t satisfied with the hold they have on everything these days. Now they want to dabble in the repo market. They’re reviewing the whole market this week.

Apparently, the poor old repo market is getting blamed for exacerbating the financial turmoil that followed the collapse of Lehman Brothers last fall.

For those of you not familiar with this market…The repo market is a utility for overnight funding… (Some go longer than overnight, but the overnight repo and rev repo market is what is being reviewed.) So, look for more government reforms in a market that has existed for many years just fine and dandy without government intervention.

That’s it for today… My little buddy, Alex, and I were on our own for part of the weekend, and we did just fine! Last week, I bought a used Bass Guitar, and now I can add some bass to Alex’s guitar playing…it’s fun! The two of us, “jamming” in the basement! All we need is drummer, so people can feel a beat, yeah….. HA!

I just heard on the radio that the “heat index” could hit 110 today here in St. Louis! My mind immediately flashes back to when I was a kid, and we didn’t have air conditioning! Then we got one that cooled one room…I had six siblings so the nine of us would all sleep in that one room! We were NOT allowed to go in that room during the day! And look! We survived! HA! Okay, thanks for going with me on the trip down memory lane… I hope you have a Marvelous Monday!

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