Tuesday's Musings - 3/12/2013

Top of the morning to you wherever you are (I guess it is Afternoon in Stuttgart for my German friends).

I should be feeling on top of the world this morning, as my medium term gold miner trade is working wonderfully well, as well as my long term trade in CISCO.  My trade in MGM is not doing very well, but it is a small loss and has good money management technique to stop any significant bleeding.

North Korea

Kim Jong has increased his rhetoric.  http://www.cnn.com/2013/03/12/world/asia/koreas-tensions/index.html He is telling his soldiers to 'get ready to annihilate the Americans" and 'reign bullets on the enemy'.  This talk is likely to lead to strengthening of the US dollar.  Ask me why...

Currencies

The currency traders are most likely waiting for Wednesday's release of retail sales by the commerce department.  The expectations are going to be high as the labor report was so positive. 

The ranges are likely to be fairly narrow. 

Canada

Mark Carney (leaving for Bank of England) pushed the loonie lower when he maintained his push for Canada's low interest rates.  Citigroup, UBS, and Goldman strategists say that investors have started moving out of the Canadian dollar for the south -- Mexico, Brazil and possibly others.

Mexico

The Mexican Peso rallied to its strongest level vs US in over a year.  Policy makers in Mexico indicate that last week's rate cut is the only one, and they are finished with cuts.  

Mexico has one of the highest real interest rates of in the developed world.  

Brazil

During 2013, the Real is the best performing currency in the world against the US$.  Brazilian Policy makers have reversed their position on driving the value of the Real lower, and have started concentrating on inflation.  This causes the interest rates to rise, and as the interest rates rise so does the currency value against the US$.

The bank has been selling currency swaps to prevent the Real from falling to quickly.  The finance minister, Guido Mantega wants to "transition to a more solid, competitive, and efficient economy." 

Interesting...  You can trade the Brazilian ETF if you want to invest in Brazil.  For retail traders, I do not recommend trading FOREX or currencies futures.  

That is it for today.  Tomorrow starts the release of several big economic reports in the USA.  You can find them on http://www.bloomberg.com/markets/economic-calendar/