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June 9, 2006

Economic calendar will have impact this morning, Fri., June 9, 2006, 8:15 AM

All eyes are on the U.S. economic calendar today because at 8:30am, we get to learn something of the international trade deficit of the U.S., and of the change in prices of goods that Americans are importing.

And these are drivers of the $USD. The continuation of a narrowing international trade deficit would (if true) likely boost the Dollar, and knock down oil and metals prices because that would be yet another sign of a slowdown in the U.S. economy.

Moreover, if the prices of imported goods are seen to fall, that should be good for the Dollar too because it would mean that less inflation is being imported, meaning that buyers are getting more bang for the buck. Ergo: a higher USD.

btw, the Canadian Dollar (priced in USD) is absolutely flying today -- up almost a full point. That could be the result of an amazing job growth number in Canada reported today, or weakness to come in the USD everywhere.

But we'll see all that unfold in a few minutes at 8:30am ET.

Then at 10:00 am ET, the rocket scientists at MIT get to hear in person a speech from Fed head Ben Bernanke. I wonder if he can control the visible nervousness. It's starting to get to me that maybe this man is not all the professor he is cracked up to be.

I wonder who writes his speeches anyway. Hill & Knowlton?

The man does need some PR because it's a rough world he now deals in. The Street is not the Ivory Tower.

The Street is looking up this morning, particularly in the equity futures. I'm wondering if the econ data gives a further boost and then shortly after 10:00 am -- boom -- the house caves in as the lips of Bernanke begin to move.

Just wondering. No forecast.

btw, you can take the links to the Econoday reports I gave above and change the number 6 (June) for earlier months if you want to go back (as I occasionally do) to study the previous reports and their correlations to market prices that followed.

That's research, and it is time consuming. But it's worth it.

Posted by Posted by Bill Cara on June 9, 2006 08:15:54 AM | Category: Economics

Discourse

US exports up sharply, as also the prices of imports. Grist for the inflation mill, perhaps?

Posted by: Novalawyer [TypeKey Profile Page] at June 9, 2006 9:18 AM [link]

Well, it looks good for oil and gold this a.m. And so with the S&P.

Thanks for mentioning the BB factor. You're right, the market is so skittish these days I'm now prepared for anything.

Posted by: number2son [TypeKey Profile Page] at June 9, 2006 9:31 AM [link]

Bill,

Would you be able to write a blog that explains some of the intricacies of economic slowdown vs. inflations vs. interest rates vs. USD vs. Gold?

You say that if the exports are greater than imports and the trade deficit is lowered, that is a sign of a US economy slow down which will boost the dollar and hurt Gold. But I thought that if we have signs of a slow down then interest rates are less likely to go up (or will go up less), and the USD will be hurt by that, and GOLD will go up at the prospect of lower interest rates. Also, why exactly are signs of a slow down good for the USD other than to say that the US economy looks to be stabalizing (but perhaps it will slow down too much).

I know these are macroeconomics concepts, but I'm sure others would benefit from an explanation as well. If Bill doesn't have the time, anyone else can feel free to volunteer :)

Thanks in advance.

Posted by: Fazeli [TypeKey Profile Page] at June 9, 2006 9:38 AM [link]

Fazeli,

Simplified, you could look at it on a country basis. A currency reflects the strength or weakness of a country. A strong country is one that is making lots of "stuff" and sells the "stuff" to it's own people AND lots of people abroad with more exports than imports. That country will have a strong currency because of this positive trade balance and Current Account (CA, is more that trade, I'm simplifying it). The US has a negative CA and it is getting worse. For other countries that don't have the global currency (USD) as reserves, their currencies would have dropped more than the USD has IMO.

So, Bill mentioned that gold would fall if the trade balance improved. If the trade balance improved, the CA would improve thus improving the dollar and gold would sell off due to the inverse relationship. Hope that helps.

Posted by: g034 [TypeKey Profile Page] at June 9, 2006 10:58 AM [link]

Okay this is just too bizarre. At 11:50am someone opened the trapdoor on gold. Did we capture Osama? Did we withdraw from Iraq? With all the other funny charts today I am just happy to be sitting on my hands. That 34 on GDX yesterday was MIGHTY tempting and may prove to be the capitulation point but when I see charts just drop off like this one (What? 10 minutes?) I just shake my head.

Posted by: MarkM [TypeKey Profile Page] at June 9, 2006 12:21 PM [link]