Ralph Shell @ 1:24 PM, Thursday August 05 2010
Comments by Washington insiders and their East Coast allies are skeptically received by the Main Street crowd. Little does it matter if the insider has a R or a D by his name, Main Street is wary this group may have found a new way to move money to their friends and supporters, from the West. In this context, what do the recent comments by Treasury Secretary really mean?
In an exclusive interview on "Good Morning America" ....'Treasury Secretary Timothy Geithner acknowledged that it is still a "tough economy" for most Americans, and warned it's possible the unemployment rate will go up for a couple of months before it comes down as more people enter the labor force.
"If you look at the numbers last week that tell you what's happening to the economy as a whole, what they showed is the private sector is getting stronger. So if you'd add together business investment and consumption, that part of the economy, which is what matters for the future, is getting progressively stronger and that's very important," Geithner said.
What is Geithner saying, and can he be believed. Is he lowering expectations now, so they can later claim the numbers are not so bad? Today's unemployment claims might suggest tomorrow's unemployment rate may go up. Do they expect a higher unemployment rate now and a lower one in October will get them votes? And what about the comments that the private sector is expanding? Does that imply a better than expected NFP?
The average NFP guess is -59K, so the bar is pretty low, and it would not take much for a bullish surprise. The assessment of the US economic performance has been morose for the past month, with the US Advance GDP cut to 2.4% down from an estimated 2.5% and 3.7% in the previous quarter. Compared to the Brit's number +1.1% in the previous period and the last reported euro q/q GDP of only +0.2%, the US number looks robust.
Going forward the USD bears expect the Fed to keep rates low and the money supply ample. Should deflationary expectations continue, and the demand for money remains soft, Fed President Bernanke may find his monetary solutions may be as effective as treating a virus with antibiotics.
Trading the NFP is always a challenge and we find it best to get the number and then trade. Should the numbers confirm the economic slow down is continuing, perhaps you should take a look at selling the USD/CHF. Weather the SNB likes it or not, the Swissy has become a safe haven currency. The move toward parity has lost momentum, but we think selling the USD versus the CHF in the 1.05/06 has some merit, risking a move out to 1.0690. A move to parity might be too optimistic but 1.02 seems like a reasonable target.
Author: Ralph Shell - ForexRazor Analyst - Graduated from a small Ohio liberal arts college. Graduate studies in economics and history at Duke University. Ten years experience trading cash commodities in domestic and export markets. Former commodity analyst with Merrill Lynch in Chicago. Member of and floor trader at the Chicago Board of Trade for 18 years.