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Daily Market Commentary

June 4, 2007

More strong economic data came in late Friday - further proving the resilience of this economy.  ISM manufacturing came in strong at 55, staying above 50 for the fourth month in a row (north of 50 being in the "boom" area).  Bonds responded by trading lower, especially after factoring in strong employment data.  Housing appears to be the only part of the economy showing any significant weakness.  This will put pressure on the Fed, as raising rates directly adds to the housing woes for all those who having ARM type loans.  The market has responded by bidding Fed Funds futures higher, zero-ing out the chance of cuts this year (although Fed Funds futures have historically been a poor indicator of actual Fed moves)

 

 

This morning, bonds are slightly higher on a flight to safety as it looks like risky assets are in for a pullback today.  We have only Factory orders to watch at 10 am, and there isn't any big release data coming until Canada's employment numbers on Friday.

 

The CAD$ continues to power forward, well into the 94 cent range.  It appears unstoppable here, ignoring all technical resistance points and despite it's previous fundamental correlations.  It's just fashionable to be long the CAD$ right now, and nobody wants to step in front of this trade.

 

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