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A Complete 180 for the Dollar

Chuck Butler (July 2, 2009)

Thursday, July 2, 2009
Courtesy of China…

By Chuck Butler I’m reminded that we all need to be thankful for the patriots that led this country to victory and thus our freedom. The freedom for me to write a letter like this, each day, that allows me to say what I want to say. And since this weekend we will celebrate our Independence, I thought this to be a good time to have a Thankful Thursday!

You know, the ending story for those 56 Patriots that signed the Declaration of Independence is not a happy story… So, when we learn of their collective fates, we realize that freedom does not come free. This time of year always stirs up the emotions that are burning all year…

Two things have happened in the past 24 hours that have moved the currencies and caused some very wild swings… So, let’s look at the “two things,” eh?

When I left you yesterday, the currencies had rallied back and were waiting for more data. Yesterday’s data was overall not good, led by the ADP Employment Report for June. The report showed there were a greater number of job losses than forecasted (-473,000 VS -395,000 forecast).

According to ADP the bleeding continues. Now we have to wait for the Jobs Jamboree that will print today, to see what “games people play now, every night and every day “.

Chinese: “Can We Talk About a New World Reserve Currency?”

So, the currencies moved a bit more with the data printing and showing continued rot on the vine. For instance, the ISM Manufacturing Index remained below 45, which is recessionary to me. But the real blow to the dollar yesterday came when G-8 Sources announced that China has asked for the G-8 Italy summit to discuss the issue of a new global reserve currency.

You should have seen the dollar selling at that point! Ouch! The euro climbed to 1.4175, and took the rest of the currencies along for the rides! This was HUGE folks! There it was… On the G-8 Agenda!

However, seeing how much damage they did with that stunt, the Chinese had to do something quickly. And quick they were… China’s Vice Foreign Minister said he is “not aware of any plan to discuss alternative reserve currencies at next week’s G-8 meeting.” And just like that, the turnaround was on!

As a result, the dollar is firmer overnight, and the euro has lost that 1.41 handle once again. These probes to the 1.41 handle are becoming more frequent, but with little staying power.

So there you have it… One item made the currencies soar. And the denial made them come back to earth, all within 24 hours… Jack Bauer would be proud!

Watch for Jobs to Rock the Markets Today…

As I explained on Monday this week, the Jobs Jamboree was moved to today, to avoid the markets being thinned out tomorrow. Apparently, the Bureau of Labor Statistics (BLS) wants everyone to see their work! HA!

The “experts” believe that the jobs losses will have increased in June, adding 20,000 lost jobs to May’s “BLS adjusted” number of -345,000. As we went to press, the number came out at 467,000 jobs. If it had gone as planned, I’m sure the “risk takers” would be happy enough. They should continue adding risk assets like stocks, currencies, and precious metals to their portfolios.

As it is, the risk takers will probably put a lid on their propensity to spend on risk assets… For now, at least!

Oh and one more thing on the job losses for June. Just the “forecasted” number of lost jobs prints, that would mean the number of people working today, in 2009, would be about the same number of people that were working in May of 2000! (As it is, the number is MUCH higher.)

Talk about a Lost Decade! I wonder if the major media will pick up this fact? It surprised me! Strange but true.

That’s it for today…Time to get going and be thankful on a Thursday!
Chuck Butler

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