Productive Yanks Pummel Euros
New data from the Labor Department showing that Americans were more productive than originally forecast in the last quarter wreaked havoc on euro FX futures as traders threw in the towel on the contract and watched it drop by the largest figure ever to a contract and all-time low. Continental currency futures were hammered in sympathy.
Productivity was up from an estimated 5.3% to 5.7%, widening the annualized pace of worker output per hour to three times the rate of the first quarter of the year. The report drove home the notion that the Fed’s engineered soft landing has been successful in cooling a hot economy and taming inflation, while investments in technologies continue to make the US economy ever more productive.
Compare US economic vitality to recent developments in Europe. Just days ago, German Chancellor Schroeder “welcomed†a weaker euro, saying it would “benefit†exporters. A cheaper euro could stimulate some export-driven economic revitalization on the continent, but shows that Euro technocrats are at odds with European Central Bankers who want to strengthen the euro and eradicate looming signs of inflation. The impasse implies there may be political meddling in the formulation of continental monetary policy, but more immediately broadcasts that the ECB will likely not intervene in international currency markets to support the sagging euro. The lack of cohesion put forth by Eurocratic meddling also demonstrates confusion in the formulation of Euroland monetary policy and undermines (slightly) the ECB’s sovereignty.
Higher oil prices and a potentially colossal financial combination also removed buyers as the euro hit new lows. Protesters in France demonstrated against the high taxes that comprise as much as 70% of the price of European gasoline and oil prices. Fuel is often three times the price paid at American pumps and high prices stymie economic growth while adding to inflation. Here, a weak euro is a handicap economic revitalization and further undermines the currency. Also, a German magazine’s report that Deutche Bank would buy JP Morgan added to the downside in the euro as billions would have to be spent in the acquisition.
The euro FX
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PowerRating), from the Implosion-5 List, also hit new contract lows and 11-year valleys, slipping .0105 to .5629. Swiss francs made good on an Off The Blocks entry, a strategy outlined in the Futures Education section that keys off the Implosion-5 and Momentum-5 lists for low-risk entries. Implosion-5 member British pounds also tumbled .0150 to 1.4392.
The world remains unconvinced that OPEC will make any policy changes that will materially effect the supply deficit that currently stands anywhere between 25% and 40% below stockpiles levels from one year ago. From the Momentum-5 List, October crude oil
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Natural gas futures
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PowerRating) hit their highest level since the contract started trading Tuesday and extended gains Wednesday, closing up .121 at 5.071. The chart has traced an inverted head-and-shoulders pattern. To estimate the measuring objective or distance to which this contract could travel using traditional and statistical chart analysis, see my article on Defining Reward and Risk Ratios in the Futures Markets, also in the Futures Education section.
In stock index futures, JP Morgan
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Nasdaq 100 futures
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Finally, grains got milled, erasing days of gains on moderating weather and a still-healthy crop outlook. The entire complex lost at least 2%, with November beans
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