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The Two Places You’ll Find the “Recovery” that We’re Missing in the U.S.

Chuck Butler (September 30, 2009)

A short one today… I just want to bring you up to speed on a miraculous event that happened in the Forex markets overnight.

For the first time in a month of Sundays, the euro isn’t leading the charge against the dollar. The Aussie dollar and New Zealand dollar are…

Overnight, we had a strong Retail Sales report in Australia, and a strong Business Confidence report in New Zealand. While we may not be seeing a “recovery” here in the U.S., Australia and New Zealand are an entirely different story altogether. The recovery story is alive and well there.

After Russia cut rates yesterday and nearly halted the rate cutting cycle, it seems the entire game has changed overnight. “Game on!” as Wayne and Garth would say.

The Aussie Retail Sales report for August climbed .9%, erasing the -.9% loss in July! This report plays well with the recovery story and the thoughts that the Reserve Bank of Australia (RBA) will raise rates before year-end…

New Zealand saw their Employment Confidence Index climb to 103 last quarter, from 96.1, the previous three months. The report showed that 32.2% of companies surveyed, expected sales and profits to rise over the next 12 months. I know that doesn’t sound like a resounding vote of confidence, but the previous number was 26%. So that’s quite a jump!

Of these two, I expect the RBA to lead with the rate hikes, while the Reserve Bank of New Zealand (RBNZ) will drag its feet. They don’t need the kiwi to start rising aggressively, as exporters in New Zealand are having a tough time now, with kiwi as strong as it is now!

Whenever the commodity currencies of Australia and New Zealand have good performances vs. the dollar, the other Commodity Currencies get to play along… So that means the performances VS the dollar of Canada, South Africa, Norway, and Brazil real are all up today.

Bottom line: Watch for the Aussie dollar to appreciate ahead of the next rate cut cycle. When that happens, you’ll want to be holding Aussie dollars (hint, hint).

That’s it for today, Have a Wonderful Wednesday!

Chuck Butler

P.S. My colleague Ashish just recommended a dynamite way to go long the Aussie dollar in the October issue of Currency Capitalist. Members, please be sure to pick up your latest issue online this weekend!

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