The Dollar: Helplessly Hopeless

U.S. March PPI up 1.1% on higher energy, food costs
WASHINGTON (MarketWatch) - Wholesale prices surged 1.1% in March, led by rising energy and food prices, the Labor Department reported Tuesday. Energy prices rose 2.9% in March, while food prices gained 1.2%. The core producer price index, which excludes volatile food and energy, rose 0.2%. Economists surveyed by MarketWatch had expected the PPI to rise 0.4% and the core to rise 0.2%. Year-over-year, the PPI is up 6.9%. The core PPI is up 2.7% over the same time period.

Odds of a half-point cut to fed funds dip after PPI report
SAN FRANCISCO (MarketWatch) -- Fed funds futures slid early Tuesday after a U.S. wholesale inflation report for March showed a sharper-than-expected rise in price growth. The May contract fell to 98.08 mid-morning on the Chicago Board of Trade from a settlement of 98.11 Monday. The contract is now pricing in a 32% chance of a half-point cut to the fed funds target rate when the Federal Open Market Committee meets April 29-30. It fully prices in a quarter-point cut. Late Monday, the contract reflected about 44% odds of a half-point cut. The fed funds target rate is currently 2.25%; a half-point reduction would bring the rate to 1.75%.

And so the Dollar catches a bid because the addle-minded believe that rising inflation will curtail Fed rate cuts and thus strengthen the Dollar. Wishful thinking. The Fed could stop cutting interest rates this minute, and never cut them again, and the Dollar will not be strengthened in any way. Only ONE country has worse interest rates than the US and that's Japan. Rising inflation is the result of a weak Dollar and is Gold positive.

So what if the US Fed stops cutting interest rates. The rest of the world currencies still offer better returns. An interest rate cut by the ECB could help the Dollar marginally, but they are predisposed to fighting inflation so that is unlikely anytime soon if at all. The US Fed could raise interest rates to fight inflation and support the Dollar, but in a slowing economy that would prove disastrous so that is unlikely anytime soon as well. The fact is the Dollar is underwater and sinking...soon to be sinking ever faster...there is little that can offer it much hope in an environment where the government stewards backing it are not interested in taking fiscal responsibility for it. The Dollar is helplessly hopeless.


Crude oil at new high just above $114; gas also at a record
NEW YORK (AP) -- Energy traders rewrote the record books again Tuesday, pushing oil futures past $114 a barrel as gasoline and diesel prices struck new highs of their own at the pump.

Light, sweet crude for May delivery jumped as high as $114.08 a barrel shortly after regular trading ended on the New York Mercantile Exchange. That is nearly $2 above an intraday high set last week.
http://biz.yahoo.com/ap/080415/oil_prices.html

Oil prices are vaulting higher by the day. Today's move higher in Oil prices firmed current bids under Gold and Silver. Rises in both Gold and Silver today were capped by the false strength in the Dollar. It is only a matter of time before the lids come off these two Precious Metals. 935 Gold and 18.32 Silver. Wednesday's CPI report could be just the catalyst to push Gold and Silver through resistance and towards their recent highs. That PPI report, coupled with another poor petroleum inventory report mid morning Wednesday, may be just what the Precious Metals Bulls need to squeeze the shorts cluttering these markets.


Net Foreign Purchases Of U.S. Securities Increase In February
Monthly net TIC flows, which include non-market flows, short-term securities, and changes in banks' dollar holdings, were $64.1 billion in February, nearly twice the $35.7 billion from January.

Financial market analysts consider the monthly data from the Treasury Department to be a significant but imprecise gauge of how easily the U.S. can finance its trade deficit. The February TIC flow compares with the $62.32 billion trade deficit during the month, reported last week by the Commerce Department.
http://www2.blogger.com/post-create.g?blogID=7490177925219574159

By the slimest of margins, the US was able to finance it's trade deficit in February. It will be interesting to see how much longer this country can avoid having the World turn it's back on us. There's a sucker born every minute, and there were plenty of them around the globe buying US securities in February. Today's TIC report for February was Dollar neutral.


John McCain Gets It
McCain blamed the slowdown of the nation's economy in part on bankers and lenders who ``forgot some of the basic standards of their own profession,'' leading to the current crisis in housing and credit.

He singled out James Cayne, 74, chairman of hobbled securities firm Bear Stearns Cos., and Angelo Mozilo, 69, chief executive of Countrywide Financial Corp., which lost $704 million last year.

``Something is seriously wrong when the American people are left to bear the consequences of reckless corporate conduct, while Mr. Cayne of Bear Stearns, Mr. Mozilo of Countrywide, and others are packed off with another forty- or fifty million for the road,'' McCain said.

Yes John, something is seriously wrong, and Gold knows it. Spread the word.