Saturday, January 15, 2011

Citizens Of The World Unite!

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By Mike Conlon | January 14, 2011

Here It Comes!

Over the last few days I have been harping on the inflation and it is starting to rear its ugly head.  Yesterday, ECB President Trichet surprised the markets by mentioning the risk it imposes to economic recovery.  One would think that the sovereign debt issues he is dealing with would be caution enough, but he took the opportunity to add fuel to the fire with his hawkish comments, sending the Euro higher.

This did not escape the Chinese, however, as they raised bank reserve requirements by 50 basis points in an attempt to curb lending to reduce their money supply to slow down demand.  Treasury Secretary Geithner noted yesterday that Yuan appreciation may not be such a big deal anymore, as higher prices in China will reduce demand for their goods, which will reduce their overall current account surplus.  On a personal note, I can confirm that indeed prices and domestic demand in China are increasing as businesses that have been working with China are now seeking cheaper alternatives.  Keep your eye on India, folks.

Earlier this morning, German CPI data came in as expected but showing signs that inflation may be on the rise which would fall in line with Trichet’s comments.  This could cause a rise in Euro zone interest rates, despite the need for cheaper re-fi costs for the PIIGS countries.  PPI input data in the UK was also higher, boosting the Pound.

And lastly, CPI data here in the US came in hotter than expected, as the headline number showed a 1.5% rise vs. an expectation of 1.3%.  This comes as no surprise as agricultural commodities have been soaring higher, so be prepared to pay more for food and energy unless something is done to combat this problem.

However, equities and commodities markets are lower which highlights China’s influence on those markets as they are the only country that appears to be doing something to attempt to put the brakes on from a monetary policy standpoint.   Though allowing their currency to appreciate would go a long way to combat their problem.  In time.

In the forex market:

Aussie (AUD):   The Aussie is lower across the board as the China’s attempts at a slowdown will affect the Australian economy greatly as China is the largest buyer of Australian exports.

Kiwi (NZD):   The Kiwi is also lower for the same reasons as the Aussie, for as Australia goes so does NZ only to a lesser extent.

Loonie (CAD):   The Loonie is also lower this morning as a pullback in commodities, particularly oil, is weighing on the currency.   However, it is strengthening vs. USD off of the morning lows as it traded close to parity.  (Click chart to enlarge)


Euro (EUR):   The Euro is mixed this morning, trading higher against the commodity currencies but lower against the rest.  After yesterday’s spectacular run higher, the Euro may be experiencing a bit of “buy the rumor, sell the news” as CPI data in Germany was as expected.  In addition, Euro zone trade balance figures showed a deficit vs. an expected surplus.  (Click chart to enlarge)


Pound (GBP):  The Pound is higher across the board as PPI input data came in much higher than expected.   If this translates over to higher CPI data (which is to be reported next Tuesday), then the BOE may be under major pressure to do something about monetary policy through either a reduction of bond-buying or a rate hike.

Dollar (USD):   The Dollar is giving back earlier gains after the CPI data was reported as the market has no conviction that the Fed will do anything about rates or QE2 anytime soon and would prefer to allow US citizens to pay the extra tax (inflation) on necessities rather than potentially harm the banks and the housing market by normalizing policy.  The Lame-stream media is reporting that retail sales rose .6% for the month of December, which makes 6 months in a row, but insiders know that the market was really expecting a rise of .8%.  Never ruin a good story for the want of a few facts!

Yen (JPY):   The Yen is mixed this morning as various carry trades are unwound and the safe haven status of the Yen is in demand as the potential Chinese slowdown affects demand and risk appetite.

Citizens of the world unite!

Consider this a “capitalist manifesto”.  Your government (wherever you are) has sold you down the river to protect the banks and the financial elite.  You know, the people who got the world into this financial mess in the first place.

Now they expect you to pay MORE for the basic necessities you require to live.  How are they doing this?  Through the insidious tax known as inflation.  Inflation affects us all equally, but not proportionally.

When prices of food and energy move higher, it becomes harder to make ends meet, especially for working-class folk.   Do you think that the CEO of a big bank cares that it costs that the price of milk goes higher, or that the cost to heat one’s home is through the roof.  Not at all, its pocket-change to him.

Yet he’s protected by the Fed under the guise of “too big to fail”, so he gets to not only keep his job but pay himself an enormous bonus to boot!  Never mind the fact that it was you, the tax-payer, who allowed this charade to continue despite having no say in the matter.

Now they want you to pay even more!  This isn’t just a US phenomenon, look at what is happening around the globe.  A weak US dollar is driving prices higher and exceptionally low interest rates around the globe have flooded the world economy with too much cash chasing too few goods.  Central banksters could reduce this through tightening monetary policy by raising rates, but they are too afraid to harm their bankster buddies!

So what can you do about it?  The answer friends, is the forex market.  Protect yourself from those who want to harm you by allowing your wealth to disappear through inflation.  It’s no coincidence that central bankster is not an elected position!

To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!

To follow these events live with a free, real-time practice account, click here!  Don’t miss out on the world’s fastest growing market!

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