ECON: The slide continues
These are the numbers from five days ago.
- EUR\USD: 00.727
- GBP\USD: 00.494
- CHF\USD: 01.187
- CAD\USD: 01.057
Yes, these are all downward trending values, meaning that the dollar's value is falling across this board. New numbers are now due to expectations that the Federal Reserve will have to drop rates by at least 25 basis points (0.25% - 1 basis point = 0.01%) on 19Sep07. Many analysts are calling for a 50 basis point drop.
- EUR\USD: 00.721 (-0.006), $1.38/EUR
- GBP\USD: 00.4912 (-0.0028), $2.035/GBP
- CHF\USD: 01.184 (-0.003), $0.84/CHF
- CAD\USD: 01.041 (-0.016), $0.959/CAD
These are all-time lows for the US Buck and many are re-considering the advisability of remaining tied to the Falling Buck. Switzerland is one of them and OPEC should be another. Both should be considering linking to the EUR instead.
Considering that we are surrounded by the EU, most of Swiss business is conducted with the EU but the USD-locked CHF (Swiss Frank) is now at CHF\EUR=0.608 or 1.64CHF/EUR and falling fast. Yes, the Swiss banks intentionally keep the CHF locked at around 0.80USD to the Swiss Frank.
OPEC has a larger problem since oil is traded in USD and the volatility of the falling buck is reducing the value of their oil and what they can do with their oil profits.
This is only the beginning. I see EUR/USD hitting 1.40 before the end of the year and we could see 1.50 before next summer, unless they're allowed to raise rates. However, raising rate will uncover even more of these debt shoals and send even more Americans into bankruptcy/default. The magnitude of the sub-prime market has yet to be understood and the depths haven't even been plumbed yet. The Fed has to start raising rates again (forget cover stories about inflation, it's about the falling buck) and everyone with an ARM (Adjustable Rate Mortgage) is going to be in trouble, which is what triggered this latest crisis.
The low jobs creation report is also troubling, as we go into Q4, typically the slowest jobs creation period of the year. If the US avoids a recession, it'll be by the skin of it's teeth. If it doesn't, the US Buck will fall even faster.