As the Club Med nations come to the table asking for handouts, the ECB has gone ahead with the first of many proposed rate hikes. Rising inflationary pressures as a result of booming commodity prices led by Crude Oil could have forced the ECB's hand at this point. But is this rally in the EURO justified?
Is the USD in much worse shape than the Euro?
Here's my analysis:
Sadly,most fiat currencies are seriously flawed as governments continue to ignore structural problems of their economies, preferring to ''kick the can further down the road''.
This is reflected in the fact that Gold and Silver continue to rally in most currencies.
Commodity currencies like the CAD, Swedish Krona & the Australian Dollar remain vulnerable to a sell off in the commodity markets. The Swiss Franc and the Japanese Yen have also shown sustained strength vs the USD.
Source : Commodity Prices / Quotes & Commodity Charts - Free - A fantastic site for commodity charts.
The richest 1 percent of Americans now take home almost 24 percent of income, up from almost 9 percent in 1976. As Timothy Noah of Slate noted in an excellent series on inequality, the United States now arguably has a more unequal distribution of wealth than traditional banana republics like Nicaragua, Venezuela and Guyana.
C.E.O.’s of the largest American companies earned an average of 42 times as much as the average worker in 1980, but 531 times as much in 2001. Perhaps the most astounding statistic is this: From 1980 to 2005, more than four-fifths of the total increase in American incomes went to the richest 1 percent.
That’s the backdrop for one of the first big postelection fights in Washington — how far to extend the Bush tax cuts to the most affluent 2 percent of Americans. Both parties agree on extending tax cuts on the first $250,000 of incomes, even for billionaires. Republicans would also cut taxes above that.
The richest 0.1 percent of taxpayers would get a tax cut of $61,000 from President Obama. They would get $370,000 from Republicans, according to the nonpartisan Tax Policy Center. And that provides only a modest economic stimulus, because the rich are less likely to spend their tax savings.
At a time of 9.6 percent unemployment, wouldn’t it make more sense to finance a jobs program? For example, the money could be used to avoid laying off teachers and undermining American schools.
Likewise, an obvious priority in the worst economic downturn in 70 years should be to extend unemployment insurance benefits, some of which will be curtailed soon unless Congress renews them. Or there’s the Trade Adjustment Assistance program, which helps train and support workers who have lost their jobs because of foreign trade. It will no longer apply to service workers after Jan. 1, unless Congress intervenes.
So we face a choice. Is our economic priority the jobless, or is it zillionaires?
USD CHF : The CHF broke down below parity in its recent rally vs the USD
USD CAD : It came ever so close to testing parity vs the USD
USD JPY : Despite the efforts of the Bank of Japan to weaken the JPY, the JPY continues its relentless upward march.
EUR USD : A weak EUR helped boost Germany's GDP numbers last quarter. the recent rebound in the EUR will surely make life difficult for the Club Med nations
Conclusion:
The USD appears to be oversold in the near term and a counter trend rally is underway. The market is betting on some mega fire power solution from the US Fed at its meeting in November. If QE2 disappoints and the equity markets sell off, the USD could stage a much stronger rally!
The Equity markets have been getting far too complacent about the weak and worrying news data and unemployment numbers in the US.
Fund flows to emerging markets have boosted stock prices across the board and a correction is well overdue. These markets are ''not decoupled from the actions of the US Fed'' and when the tide starts to turn we can expect large fund outflows to have a drastically negative impact on stock prices in emerging economies
Lastly, the rally in Gold prices also appears ripe for correction and consolidation. Silver prices too, are clearly overstretched in the near term. expect lower prices if the USD stages a comback rally. It's not time to be buying the precious metals sector just yet!
Watch this space!
Lastly, here is a link from Main Street that the guys on Wall Street should take a look at.
Food-stamp tally nears 40 million, sets record Reuters
""""""""Food stamps are the primary federal anti-hunger program, helping poor people buy food. Enrollment is highest during times of economic distress. The jobless rate was 9.9 percent, the government said on Friday.
The Agriculture Department said 39.68 million people, or 1 in 8 Americans, were enrolled for food stamps during February, an increase of 260,000 from January. USDA updated its figures on Wednesday.""""""""""""
