Tuesday, November 14, 2006
US$ Focus Shifting To Domestic Data
The Associated Press reports on the markets. "Gold futures settled lower Tuesday at the New York Mercantile Exchange following the choppy moves of the U.S. dollar and awaiting direction from economic data due later in the week. The December contract settled 50 cents lower at $625.30 a troy ounce. During the session the contract dipped to a low of $620 after the dollar bounced off its lows. December silver settled 0.05 cents higher at $12.89 an ounce."
"January platinum settled $30.70 lower at $1,173.20 an ounce. December palladium ended $7.25 lower at $319.50 per ounce."
"Larry Young, senior trader at Infinity Brokerage, said gold is set up for a technical breakout on Wednesday in either direction. 'Gold is set up to take out $631 on the upside and $619 on the downside,' said Young who will be eyeing currencies for signals."
"Technical-based moves are expected for gold and silver on Wednesday, then economic data on Thursday should provide more direction, Young said."
The Street.com. "The US dollar was kicked down Tuesday by soft economic data. The greenback was falling, recently buying 117.518 yen, down from 118.19 late Monday. It was also sliding against the euro, which was trading at $1.2822 vs. $1.2803."
"The currency moves came after the Commerce Department reported slowing retail sales for October, down 0.2% compared with forecasts of a 0.4% decline. However, investors focused on the underlying figure: Excluding autos, sales dropped 0.4% compared with expectations of a 0.3% fall."
"Also, the Department of Labor said producer prices slumped 1.6% in October vs. consensus forecasts of a 0.5% dip. Excluding food and energy costs, core PPI fell 0.9% compared with an expected gain of 0.1%"
"'The dollar is getting smoked vs. the yen,' writes Randy Diamond, an analyst at New York-based Millar Tabak. 'The bond market reaction suggests they have officially removed the Fed from rate hikes and now are expecting rate cuts as soon as March.'"
"In the official sector, the European Central Bank says it sold 180 million euros of gold and receivables last week, or almost 12 tons."
From Reuters. "U.S. economic data due to be reported this week will likely offer few reasons to expect a rebound in the greenback after its recent four week slide. The dollar has fallen 7.5 percent against the euro this year, but has held the $1.30 level for about 19 months as strong investment flows into U.S. assets and higher interest rates in the U.S. compared to Europe have given provided support."
"An unexpected drop in producer prices and tepid retail sales weighed on the currency on Tuesday, and served as a reminder that the currency is anchored to a U.S. economy that is losing momentum, while growth may be accelerating in Europe and Japan."
"The market does not expect much support for the U.S. dollar from reports on consumer prices and net capital inflows due on Thursday either, suggesting another test of the $1.30 level against the euro may occur before year's end. 'Support for the dollar keeps waning from all fronts,' said Alex Beuzelin, a senior currency strategist at Ruesch International, in Washington."
"'More 'negative' numbers later this week will solidify the view the Fed won't raise rates any time soon, while we have hawkish central bankers in Europe and Japan,' he said. 'There are few incentives to buy.'"
"Even though most of Tuesday's euro gains were lost after comments from the French prime minister were interpreted as a call for a weaker European currency, analysts said the 12-nation currency could regain momentum against the dollar later this week."
"'For the dollar, the focus now is shifting a bit to the domestic data,' said Mark Meadows, a currency strategist at Tempus consulting. Capital inflows likely slowed to $75 billion in September, after a record $116.8 billion in the prior month."
"A weaker-than-expected CPI likely would undermine the investor confidence in the dollar's interest rate advantage, and a large drop in capital inflows could been seen as evidence that foreign investors are in fact diversifying away from dollar assets."
"'Signs that the U.S. economy is slowing keep piling up,' Meadows said. 'The Fed is likely to be on hold for some time, while we have central bankers elsewhere talking about higher rates and asset diversification.'"
"January platinum settled $30.70 lower at $1,173.20 an ounce. December palladium ended $7.25 lower at $319.50 per ounce."
"Larry Young, senior trader at Infinity Brokerage, said gold is set up for a technical breakout on Wednesday in either direction. 'Gold is set up to take out $631 on the upside and $619 on the downside,' said Young who will be eyeing currencies for signals."
"Technical-based moves are expected for gold and silver on Wednesday, then economic data on Thursday should provide more direction, Young said."
The Street.com. "The US dollar was kicked down Tuesday by soft economic data. The greenback was falling, recently buying 117.518 yen, down from 118.19 late Monday. It was also sliding against the euro, which was trading at $1.2822 vs. $1.2803."
"The currency moves came after the Commerce Department reported slowing retail sales for October, down 0.2% compared with forecasts of a 0.4% decline. However, investors focused on the underlying figure: Excluding autos, sales dropped 0.4% compared with expectations of a 0.3% fall."
"Also, the Department of Labor said producer prices slumped 1.6% in October vs. consensus forecasts of a 0.5% dip. Excluding food and energy costs, core PPI fell 0.9% compared with an expected gain of 0.1%"
"'The dollar is getting smoked vs. the yen,' writes Randy Diamond, an analyst at New York-based Millar Tabak. 'The bond market reaction suggests they have officially removed the Fed from rate hikes and now are expecting rate cuts as soon as March.'"
"In the official sector, the European Central Bank says it sold 180 million euros of gold and receivables last week, or almost 12 tons."
From Reuters. "U.S. economic data due to be reported this week will likely offer few reasons to expect a rebound in the greenback after its recent four week slide. The dollar has fallen 7.5 percent against the euro this year, but has held the $1.30 level for about 19 months as strong investment flows into U.S. assets and higher interest rates in the U.S. compared to Europe have given provided support."
"An unexpected drop in producer prices and tepid retail sales weighed on the currency on Tuesday, and served as a reminder that the currency is anchored to a U.S. economy that is losing momentum, while growth may be accelerating in Europe and Japan."
"The market does not expect much support for the U.S. dollar from reports on consumer prices and net capital inflows due on Thursday either, suggesting another test of the $1.30 level against the euro may occur before year's end. 'Support for the dollar keeps waning from all fronts,' said Alex Beuzelin, a senior currency strategist at Ruesch International, in Washington."
"'More 'negative' numbers later this week will solidify the view the Fed won't raise rates any time soon, while we have hawkish central bankers in Europe and Japan,' he said. 'There are few incentives to buy.'"
"Even though most of Tuesday's euro gains were lost after comments from the French prime minister were interpreted as a call for a weaker European currency, analysts said the 12-nation currency could regain momentum against the dollar later this week."
"'For the dollar, the focus now is shifting a bit to the domestic data,' said Mark Meadows, a currency strategist at Tempus consulting. Capital inflows likely slowed to $75 billion in September, after a record $116.8 billion in the prior month."
"A weaker-than-expected CPI likely would undermine the investor confidence in the dollar's interest rate advantage, and a large drop in capital inflows could been seen as evidence that foreign investors are in fact diversifying away from dollar assets."
"'Signs that the U.S. economy is slowing keep piling up,' Meadows said. 'The Fed is likely to be on hold for some time, while we have central bankers elsewhere talking about higher rates and asset diversification.'"
# posted by Ben Jones @ 2:32 PM 
Comments:
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As it should, all these markets will probably find their fate tied to a relevant economy. In that case, the US$ doesn't look so good. Here's some news:
'In a sign of the future, trustees of the California Public Employees' Retirement System agreed Monday to venture into commodities investing. The pension board unanimously approved a one-year, $500 million pilot program that ultimately could lead to a dramatic shift in the giant fund's investment strategy and pump billions more into natural resources and commodities- related ventures.'
'This is an important day for us,' chief investment officer Russell Read told trustees of the nation's largest public fund.'
'Substantial gains made from interest rate differentials provide undeniable evidence that the carry trade strategy has been very successful over the past few years. Previously, a trading strategy done exclusively by large investments banks and international companies, the carry trade has only become popular among individual traders over the past few years thanks to the availability of leverage. The current market environment with implied volatilities at historical lows continues to favor carry trades, but trends like this cannot last forever and it seems that a number of factors are working to erode the consistency of the carry, raising the risks of a carry trade unwind in 2007.'
'In a sign of the future, trustees of the California Public Employees' Retirement System agreed Monday to venture into commodities investing. The pension board unanimously approved a one-year, $500 million pilot program that ultimately could lead to a dramatic shift in the giant fund's investment strategy and pump billions more into natural resources and commodities- related ventures.'
'This is an important day for us,' chief investment officer Russell Read told trustees of the nation's largest public fund.'
'Substantial gains made from interest rate differentials provide undeniable evidence that the carry trade strategy has been very successful over the past few years. Previously, a trading strategy done exclusively by large investments banks and international companies, the carry trade has only become popular among individual traders over the past few years thanks to the availability of leverage. The current market environment with implied volatilities at historical lows continues to favor carry trades, but trends like this cannot last forever and it seems that a number of factors are working to erode the consistency of the carry, raising the risks of a carry trade unwind in 2007.'
Ben,
OT, but have you read Dent, Arnold or Brussee? Curious about your take on the demographics angle...
OT, but have you read Dent, Arnold or Brussee? Curious about your take on the demographics angle...
I suppose I can find some.
All three are authors that published books predicting a coming depression, in whole or part due to demographic factors.
Specifically, they show that the age group that comprises "peak spending years" (mid to late 40's) has risen in numbers consistently with the boomer generation and, starting in 2010, will begin to fall precipitously. They show evidence that the population of this group correlates nicely with the inflation-adjusted DOW, even during the last depression. Fascinating stuff.
Something else... adjusting for cultural differences that result in a different age group, Japan's rise and fall also nicely correlates with the population of their peak spenders. It's hard to expand the economy when the primary customer base is shrinking, no?
Personally, I'm skeptical that demographic factors are THE principal reason for economic cycles, but I can't help but see it being a major factor.
Combined with all the other factors (nicely detailed in the recently published America's Bubble Economy) I'm still quite convinced we're headed for a depression that'll trigger that fiat currency crisis we've discussed previously.
Comments??
p.s.: Anyone else invited to chime in, too.
All three are authors that published books predicting a coming depression, in whole or part due to demographic factors.
Specifically, they show that the age group that comprises "peak spending years" (mid to late 40's) has risen in numbers consistently with the boomer generation and, starting in 2010, will begin to fall precipitously. They show evidence that the population of this group correlates nicely with the inflation-adjusted DOW, even during the last depression. Fascinating stuff.
Something else... adjusting for cultural differences that result in a different age group, Japan's rise and fall also nicely correlates with the population of their peak spenders. It's hard to expand the economy when the primary customer base is shrinking, no?
Personally, I'm skeptical that demographic factors are THE principal reason for economic cycles, but I can't help but see it being a major factor.
Combined with all the other factors (nicely detailed in the recently published America's Bubble Economy) I'm still quite convinced we're headed for a depression that'll trigger that fiat currency crisis we've discussed previously.
Comments??
p.s.: Anyone else invited to chime in, too.
TJ
I can't see demographics as the end-all/be-all of influential forces within the economy the way those guys do. I think if late 20th century economics taught us anything its just how many moving parts there are in the overall economic equation. (So many moving parts that the 90's brought us economists who tapped 'chaos theory' in an effort to grapple with a volume of data that in all likelihood will never actually be grasped in its entirety. Today we have kitchier versions like "Freakonomics").
These guys seem like modern day Malthus'es who are trying to make successful macroeconomic predictions from a single metric. (That's never been achieved historically). The grim predictions might be spot-on, but discounting the importance of other metrics like deficits, debt, the money supply, globalization, geopolitics and industrial/technological developments, war, immigration, energy issues, etc. is IMHO a little simplistic.
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I can't see demographics as the end-all/be-all of influential forces within the economy the way those guys do. I think if late 20th century economics taught us anything its just how many moving parts there are in the overall economic equation. (So many moving parts that the 90's brought us economists who tapped 'chaos theory' in an effort to grapple with a volume of data that in all likelihood will never actually be grasped in its entirety. Today we have kitchier versions like "Freakonomics").
These guys seem like modern day Malthus'es who are trying to make successful macroeconomic predictions from a single metric. (That's never been achieved historically). The grim predictions might be spot-on, but discounting the importance of other metrics like deficits, debt, the money supply, globalization, geopolitics and industrial/technological developments, war, immigration, energy issues, etc. is IMHO a little simplistic.
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