I like to follow currencies around the world as they provide insight into economies, politics, and Western Society challenges. Mostly they provide a "big" picture view for my investments.
This was my thoughts from yesterday:
- Mario Draghi - Euro ECB president, signaled that "policy makers are concerned that the euro's advance could damp inflation and hamper economic recovery." Result -- lip flapping caused the euro to drop like a stone in the river. Within 30 minutes the Euro was down to $1.30. Holy Cow the preacher shouted...
- In the afternoon, the gained some value back after the ECB agreed to some terms for Ireland. None-the-less, at 9:30 AM PST today, the Euro is still reeling.
- Ireland hopes the agreement with the ECB will allow their return to the international bond markets in 2014, and end Ireland's reliance on loans from the IMF and EU. Gentle readers: Southern Ireland is one of my favorite places to visit in the world. The EU agreement is really good news for the Irish and their people. Hopefully, they can continue to make headway.
- The Japanese Yen is stronger early today on news overnight after finance ministers (lip flapping) said "yen had weakened much more than we had hoped or expected". After one has followed the markets for a while, you will notice trading is based on expectations. This statement was outside expectations, as FOREX traders expected more attempts at weakening the Yen. Does this mean selling in the yen is over? Hardly... The Japanese finance ministers want to give traders the impression that they are prudent, and the falling YEN is not a One-way street. There is something to learn that is not said too often (if at all). Large movements in a country's currency (either up or down) in a very short time frame is not desirable as it makes business and governmental planning very difficult, and that observation is doubly true for a nations depending on imports in order to export.
- The Chinese Trade balance report was good (as was the US' trade balance). That put an end to selling in the Australian dollar (A$). For currency traders and the global economic recovery, China is signalling that the economy is growing again, and in turn China's growth will cure any Australian angst. Of course, the Australian Central Bank was trying to join in the Currency Wars, and this will not help their effort to devalue the A$.
- Go look at the Brazilian Real... Amazing... Now ask yourself, what is going on?
- Currency Wars -- all the hype about currency wars is educational if one looks beyond the emotional headlines. For many years now, the Western countries, US, and Japan have been waging a race to the bottom. While it is true the wars could become so intense that a collapse of the global financial system will occur; that is very unlikely in my opinion. The US is the center piece of the War, and if the US keeps playing this game of driving their currency lower, anything is possible. However, at some point we can hope the US comes to its senses, and the Federal Reserve will look to strengthen the $$$.
- Evan, President of the Chicago Fed said yesterday "the US Jobless Rage won't fall to 6.5% before 2015." The Fed setting the 6.5% jobless rate painted the Fed into a corner. Well US citizens, we can all look forward to 2 more years of debt accumulation.
- So far this calendar year the Federal Reserve has bought up more US government debt then the US treasury has offered according to a story on CNS news. Why would the Fed need to buy more bonds than the debt that has accumulated? Does that not scare every US citizen? Guess not as President Obama's ratings continue to climb.
Results if any? Euro is going down some more as lip flapping and expectations of investors in the Euro Zone are manipulated.
Japanese Yen will stabilize in the short term, but in the longer term head for the cellar.
Australian $ is a good LONG bet for the Forex traders until the next economic releases in China. China is growing no matter how many pundits we hear from that say they are going to collapse any time.
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