31 January 2008 - 2:05Market Commentary 1/30/08

I took the last few days off to help out with the election here in Florida, first promoting the only fiscal conservative running, Ron Paul and secondly by helping out with Project Vote Count here in Florida to ensure everyone’s ballots were counted this time. The markets have been interesting in my absence with USD/CAD now back under parity and USD/CHF at 30 year highs. Meanwhile USD/JPY holds support on the back of another Federal Reserve rate cut, this one for 50 basis points. Although the way the stock market ended it seems the rate cut was not as effective this time in rallying the Dow and vanquishing the yen. One thing is for sure, that Bernake and company are hell-bent on running the U.S. dollar into the toilet. If this keeps up it is only a matter time before reserve managers diversify out of the dollar completely and the dollar is as at parity with the Mexican peso. U.S. GDP coming out at .6% for the fourth quarter did not bolster confidence on Wall Street which was expecting a figure twice as large. The cutback in inventories while manufacturers brace for tough times ahead and a large increase in inflation at 3.8% in the fourth quarter were major detractors.  There was a sharp drop in residential fixed investment whose slack was partially taken up by higher nonresidential fixed investments. When I look at the TICS data I can’t help thinking that is just foreign currency reserve intervention. Even a higher than expected durable goods report on Tuesday could not save the dollar probably because a good deal of the increase was due to defense spending. Weaker than economists expected new home sales continued to plunge a this month’s ADP report can out far better than expected and now we can wonder if on Friday the employment number comes out strong. The Japanese economy continues to show signs of life with a lower jobless rate being released and spending on the rise. The U.K. nationwide house prices and German employment data and retail sales are also being released now. Then the official jobless rate in Germany is to be released at 3:55 am and job growth is expected to be about half of last month’s increase of 78,000. Then at 5 is EST Euro CPI will be released and at 8:30 am the feds favorite indicator for inflation the Core PCE will be released as well as spending and income targets. I think that the core PCE will come out a bit higher than forecast and might give you a reason o buy the Dollar, the key word here is right. Meanwhile Canadian GDP is supposed to be released and my guess is that it will be a slight bit better than anticipated. Then at 9:45 am the Chicago PMI comes out and afterward at 10 am it’s German CPI. Of course this Friday is non farm Friday and will be closely watching everything.