Singapore Exchange News

This is the most dismal report I may have ever witnessed, with expectations gaining that perhaps the economy was going to navigate the quagmire that is bad government policy. It is could not be more clear that government needs to get the heck out of the way of business and create a climate of confidence and stability. The difference between “soft-patch” and potential for “double-dip” is starting to become more apparent, and Obama’s speech later this morning about the report should be his last.

Lead, follow, or get out of the way is the mantra I’ve learned to live by, and if self-serving politicians can’t comply than maybe it is time to move on. This also changes drastically the debate over the debt-ceiling and the political worming around the issue is going to be sickening. This also puts further Fed monetary easing back on the table, as they do their “best” to counter-act horrible fiscal and government policies.

Obviously the markets have sold-off after this figure, and the caution to start the morning was rightly justified. Nevertheless, we are in a situation where the Dollar has sold-off and the Euro has strengthened despite the risk in the markets. Yen and Swiss franc are the beneficiaries of the safe haven play, as the market is disgusted with the US dollar right now.

In the forex market:

Aussie (AUD): The Aussie is mixed to lower as the market tries to discern whether the real risk in the market place is whether or not to own US dollars.

Kiwi (NZD): Extreme volatility exists in the Kiwi for the same reasons as the Aussie, though minus the benefit of the higher Australian interest rate.

Loonie (CAD): The morning started off looking pretty good for the Loonie after the Canadian employment report showed that some 28K jobs were added to the economy vs. an expectation of 15K, nearly doubling the expectation. However the Loonie took a nose-dive when it became apparent that a weaker US economy will affect Canada more negatively. (Click chart to enlarge)

Euro (EUR): The Euro took off on the NFP report but is giving back gains as the correlations come back into play. Earlier in the morning, Germany reported a greater than expected trade surplus on higher exports. The IMF is expected to approve the bailout payment to Greece today. (Click chart to enlarge)

Pound (GBP): The Pound also has rocketed higher as it is not the Dollar, and earlier this morning mixed PPI data showed the prices are still rising, albeit slowly so there may be stronger calls for the BOE to act if inflation rises dramatically.

Swissie (CHF): The Swissie also popped after the NFP as it is a more desirable safe-haven than the US dollar. Earlier this morning, the Swiss unemployment rate came in at 3%. While Switzerland is a much smaller economy than the US, their economic might cannot be denied.

Dollar (USD): The markets are showing their displeasure with the current trajectory we are on and I’m tired of pulling punches, not that I ever have. This administration needs to go—now. Playing games on twitter and trying to be cool is no longer working and we need a change of leadership that can act with pragmatism and not ideology. Overspending, uncertainty, higher taxes, regulation, unclear healthcare mandates are all causing businesses to ride out this failed liberal economic reign of terror.

Yen (JPY): The Yen is higher across the board as the most-desired safe haven going into the weekend. The current account total came in better than expected, as did two measures of economic confidence.

This failed experiment should be over and done with. As I look at my current tax bills and contemplate my future tax bills, I have to ask: what the heck am I paying for? I would much prefer to raise a private fund to support Sasha and Malia’s world travels, and give Obama a sit-com where he can be on TV as much as he wants and a life-time membership to a fancy golf course so he never has to pay greens fees again!

But just go… and I mean now! If you are one of the lucky 18K who found a job last month, congratulations! The US economy is now adding fewer jobs than Canada, and the US dollar is less desirable than the currency of a region that could possibly have 20% of its members default!

So like a bad gambler, I’m sure the next move is going to be to double-down, to raise the debt ceiling, more Fed easing, maybe get some temporary tax relief (which will have to paid for later through higher taxes) and any other band-aid type approach that will slow but not stop the bleeding.

Its time we bring a real doctor into the ER to revive the health of the US economy, and not just a guy who plays one on TV.

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The weak Dollar story continues to drive markets and the market is willing to suspend its disbelief that anything can derail the move higher. This includes risk.

One potential risk event is the slow but sure deterioration of Euro fundamentals, yet the market’s blind eye to the problems resurfacing only masks what is taking place. S&P joined the downgrade party and lowered ratings on Portuguese debt, though this went largely unnoticed. Also, the Irish bank stress tests could show that the government may need to take control over all banks. Yet the market’s singular focus on the potential for a rate hike shows little appreciation for risk.

Let’s also not forget the Japanese nuclear crisis and the Libyan civil war as potential risk events.

Overnight, Asian equity markets were up big-time, following the lead of yesterday’s US stock market gains. Commodities are mostly flat, after yesterday’s reversal in oil prices. Yen weakness continues.

In the forex market:

Aussie (AUD): The Aussie is mostly higher as the risk appetite appears to be strong to start the US session. Yesterday, the Aussie put in a new all-time high vs. USD. (Click chart to enlarge)

Kiwi (NZD): The Kiwi is also higher across the board catching a lift from the rebound in the MSCI Pacific Equity Index despite a report that showed building permits declined nearly 10%. While this is likely to be the result of the earthquake, expect this number to pick up in the ensuing months.

Loonie (CAD): The Loonie is also higher across the board as oil prices are fairly steady around $105. The Canadian raw materials price index came in higher than expected showing that inflation may be creeping higher.

Euro (EUR): The Euro is mostly lower though not as low as one might expect given the risk specific to the Euro zone. Downgrades, stress tests, and high yields should all be reason for concern, yet in the global currency beauty contest the Euro is slightly more attractive than USD. (Click chart to enlarge)

Pound (GBP): The Pound is mostly higher after the index of services reading came in and showed a gain vs. last month’s decline. In addition, the CBI reported sales figure came in much better than expected, showing signs of life for the UK consumer.

Dollar (USD): The Dollar is mixed, trading lower vs. the commodity bloc but slightly higher against the rest. The ADP jobs figures were good but not great, though expectations were higher. Friday’s NFP will let us know where we really stand in the jobs picture and the reported unemployment rate will be interesting if enough people have dropped out of the workforce to warrant a lower number.

Yen (JPY): the Yen continues to weaken with G-7 support and the correlative effects of higher stock prices. Industrial production figures came in better than expected last month, showing that the Japanese economy may have been improving prior to the earthquake.

This Friday’s NFP number will very important as it will show whether of not the employment picture is starting to show meaningful improvement. Everyone knows that QE2 is going to end soon so if the economy can’t stand on its own two feet then we may be in for major trouble.

The selling that is bound to ensue after the Fed removes the punch bowl could be exacerbated if some of these risk events start to unfold negatively. It seems as though the “wait and see” approach to the global economy leaves too much room for error, and my hope is that we see enough improvement in jobs to support economic growth.

But just remember, hope is not an investment strategy!

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!