Tuesday September 26, 2006 - 10:37:28 GMT
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Black Swan Capital - www.blackswantrading.com
Good $ price action...
â€˘ German business confidence declined for a third month in September. (Bloomberg)
â€˘ Key Reports (WSJ):
7:45a.m. ICSC Store Sales Index For Sept 23 Wk.
8:55a.m. Redbook Retail Sales Index. For Sept 23 Wk. Previous: Unch.
10:00a.m Sept Conference Board Consumer Confidence. Previous: 99.6
10:00a.m. Sept Richmond Fed Manufacturing Index. Previous: 3.
5:00p.m. ABC/Wash Post Consumer Conf. For Sept 24 Wk. Previous: -15.
â€śOne complication in the renminbi story is that a significant portion of the economy now depends on expectations of appreciation, especially in the property sector. If the currency appreciates quickly, these expectations might reverse, such that the economy could suffer a hard landing. This effectively rules out the possibility of a maxi-revaluation, in my view.â€ť
Hosing still falling, a Fed on hold and growing expectations of the next move a cut in early 2007, up against growth â€śmomentumâ€ť and a supposed vigilant central bank in the form of the ECB and yet, the greenback remains firm against its European counterparts.
The euro backed up this morning on a slight decline in German Ifo, which was well within the range of economistsâ€™ expectations. The pound is giving ground this morning, and has not been able to hold recent gains against the buck even despite an indication the Bank of England may be more aggressive than expected, based on comments from a senior BOE official recently.
A couple of days doesnâ€™t make a trend, we know. Maybe itâ€™s a simple consolidation of gains from last week, to shake out some euro and pound bulls near-term. But it represents good price action relative to the news for the US dollar.
Is a positive consumer surprise on the horizon for the USâ€”the basic â€śdeflationary boomâ€ť scenario theme from Gavekal research we talked about back on September 13th in Currency Currents (A â€śdeflationary boom:â€ť Commodities going south, while bonds, equities and the dollar heading north.)?
The US stock market is doing quite well. And let us not forget the stock market is a key repository of consumer wealthâ€”a counter to the US housing. The bond market is on fire, which probably is supportive of the buck on money flow (the recent hedge fund debacle may be driving some safe have stuff for others behind the headlines). And we know US corporations are flush with cash. And commodities prices are sagging, which tends to help corporate marginsâ€”at least for the users of the stuff. If corporations are doing fine (which is what the stock market may be telling us), it would indicate the US job market will remain resilientâ€¦and if the US job market is resilient Mr. US Consumer probably does okay.
Itâ€™s all still a clear as mud. Stay tuned.
Jack Crooks, Black Swan Capital Black Swan Subscription-based Service
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