Hey Guys,

Great article w/ many bites to chew on. Thanks!

This was found on Bloomberg this morning. It discusses some of the troubles that cash-rich oil, & developing nations, holding major reserves in a declining USD are feeling. Not many analysts discuss the affects of this region on the global market, but a lot of these countries have very large sovereign cash funds in which to help themsleves, & therefore the USD.

As far as AUS & NZD, there was a lot of talk about the RBA lowering rates much sooner than previously thought. That coupled w/ the poor data releases you mention, could very well have been the pricing-in we saw on Thurs & Fri. All charts for these pairs are at crucial support/resistance levels, & the EA finally broke to the upside & should quickly reach the 1.70+++ topside channel.


Here's the article: (Inflation in Middle East since last summer...)
Saudi Inflation Accelerates to Record 10.6% in June (Update1)

By Zainab Fattah and Matthew Brown

Aug. 3 (Bloomberg) -- Saudi Arabian inflation accelerated to a record 10.6 percent in June from 10.4 percent in May, led by a jump in food and housing costs, Saudi Press Agency reported.

Food and beverage prices rose 16 percent in June from a year earlier after gaining 15 percent in May, the state-owned news wire said today. Rent, fuel and water was 19 percent more expensive.

Inflation accelerated above 10 percent in five of the six Gulf Cooperation Council states as oil-fueled economic growth created shortages of housing and services. The weaker dollar and higher global food costs also made imports more expensive. All GCC countries except Kuwait peg their currencies to the dollar.

``Saudi inflation is still going to be rent and food driven for the rest of the year,'' said Monica Malik, chief economist at EFG-Hermes Holding SAE, Egypt's largest investment bank by market value in a telephone interview from Dubai. ``We expect some stabilization in food prices'' toward the end of the year.

Saudi Arabia has raised the reserve requirement for banks in an attempt to slow money supply and lending growth, which have accelerated as the central bank cut interest rates to keep its peg to the dollar.

The kingdom's M1 money-supply growth, a gauge of future inflation, accelerated to 29 percent in June from 27 percent in May. Saudi commercial bank lending to the private sector, a contributor to money supply, increased 35 percent, after gaining 33 percent in May.

Inflation has been accelerating since the middle of last year, when the rate was at around 3 percent. It has been just over 10 percent in the past three months.

Easing Pressure

``The rate of inflation growth has been slower in the last two months, which makes me optimistic that price pressure are easing,'' said John Sfakianakis, chief economist at Saudi British Bank, the Riyadh-based lender 40 percent owned by HSBC Holding Plc, in a telephone interview from Riyadh today.

The GCC is an economic and political grouping of Saudi Arabia, the U.A.E., Kuwait, Qatar, Oman and Bahrain.

Qatar had the highest inflation in the GCC, at 14.8 percent in the first quarter, followed by 13.2 percent in Oman. The U.A.E., which reports inflation annually, said consumer prices rose 11.1 percent last year.

Kuwait reported that the inflation rate fell to 11.1 percent in May from 11.4 percent in April.

To contact the reporter on this story: Matthew Brown in Dubai at mbrown42@bloomberg.net; Zainab Fattah in Dubai on zfattah@bloomberg.net
Last Updated: August 3, 2008 08:33 EDT

Hey Guys, Great article w/ many bites to chew on. Thanks! This was found on Bloomberg this morning. It discusses some of the troubles that cash-rich oil, & developing nations, holding major reserves in a declining USD are feeling. Not many analysts discuss the affects of this region on the global market, but a lot of these countries have very large sovereign cash funds in which to help themsleves, & therefore the USD. As far as AUS & NZD, there was a lot of talk about the RBA lowering rates much sooner than previously thought. That coupled w/ the poor data releases you mention, could very well have been the pricing-in we saw on Thurs & Fri. All charts for these pairs are at crucial support/resistance levels, & the EA finally broke to the upside & should quickly reach the 1.70+++ topside channel. Here's the article: (Inflation in Middle East since last summer...) Saudi Inflation Accelerates to Record 10.6% in June (Update1) By Zainab Fattah and Matthew Brown Aug. 3 (Bloomberg) -- Saudi Arabian inflation accelerated to a record 10.6 percent in June from 10.4 percent in May, led by a jump in food and housing costs, Saudi Press Agency reported. Food and beverage prices rose 16 percent in June from a year earlier after gaining 15 percent in May, the state-owned news wire said today. Rent, fuel and water was 19 percent more expensive. Inflation accelerated above 10 percent in five of the six Gulf Cooperation Council states as oil-fueled economic growth created shortages of housing and services. The weaker dollar and higher global food costs also made imports more expensive. All GCC countries except Kuwait peg their currencies to the dollar. ``Saudi inflation is still going to be rent and food driven for the rest of the year,'' said Monica Malik, chief economist at EFG-Hermes Holding SAE, Egypt's largest investment bank by market value in a telephone interview from Dubai. ``We expect some stabilization in food prices'' toward the end of the year. Saudi Arabia has raised the reserve requirement for banks in an attempt to slow money supply and lending growth, which have accelerated as the central bank cut interest rates to keep its peg to the dollar. The kingdom's M1 money-supply growth, a gauge of future inflation, accelerated to 29 percent in June from 27 percent in May. Saudi commercial bank lending to the private sector, a contributor to money supply, increased 35 percent, after gaining 33 percent in May. Inflation has been accelerating since the middle of last year, when the rate was at around 3 percent. It has been just over 10 percent in the past three months. Easing Pressure ``The rate of inflation growth has been slower in the last two months, which makes me optimistic that price pressure are easing,'' said John Sfakianakis, chief economist at Saudi British Bank, the Riyadh-based lender 40 percent owned by HSBC Holding Plc, in a telephone interview from Riyadh today. The GCC is an economic and political grouping of Saudi Arabia, the U.A.E., Kuwait, Qatar, Oman and Bahrain. Qatar had the highest inflation in the GCC, at 14.8 percent in the first quarter, followed by 13.2 percent in Oman. The U.A.E., which reports inflation annually, said consumer prices rose 11.1 percent last year. Kuwait reported that the inflation rate fell to 11.1 percent in May from 11.4 percent in April. To contact the reporter on this story: Matthew Brown in Dubai at [email]mbrown42@bloomberg.net[/email]; Zainab Fattah in Dubai on [email]zfattah@bloomberg.net[/email] Last Updated: August 3, 2008 08:33 EDT

Great Post.. Thank You..

Great Post.. Thank You..

Thanks for the props--the main reason that Gulf states (as are other economies around the world) are experiencing high inflation is their pegs to the dollar, and hence, U.S. monetary policy. What's been happening is that these countries have essentially lowered interest rates into expanding (in some cases rapidly expanding) economies.

As pointed out above, rates for mortgages in the U.S. are increasing as the housing market continues to cool. Taken together with what's happening in the Gulf states, there is a tremendous imbalance being created as rates decrease where they should be increasing and increase where they should be decreasing.

In our credit-dependent economy, bubbles should really be looked at in terms of where the cost of money (interest rates) is going as a function of demand.

The housing bubble shouldn't be looked at in terms of the increase in housing values because that was a secondary effect of the underlying problem. What really happened in the bubble was that cost and availability of credit was decreasing as demand increased.

What we have now can be thought of as an "anti-bubble," which should not be viewed as a decrease in housing prices (again, a secondary effect), but rather in terms of interest rates that are now increasing (as credit becomes less available) while demand decreases.

Thanks for the props--the main reason that Gulf states (as are other economies around the world) are experiencing high inflation is their pegs to the dollar, and hence, U.S. monetary policy. What's been happening is that these countries have essentially lowered interest rates into expanding (in some cases rapidly expanding) economies. As pointed out above, rates for mortgages in the U.S. are increasing as the housing market continues to cool. Taken together with what's happening in the Gulf states, there is a tremendous imbalance being created as rates decrease where they should be increasing and increase where they should be decreasing. In our credit-dependent economy, bubbles should really be looked at in terms of where the cost of money (interest rates) is going as a function of demand. The housing bubble shouldn't be looked at in terms of the increase in housing values because that was a secondary effect of the underlying problem. What really happened in the bubble was that cost and availability of credit was [I]decreasing[/I] as demand increased. What we have now can be thought of as an "anti-bubble," which should not be viewed as a decrease in housing prices (again, a secondary effect), but rather in terms of interest rates that are now increasing (as credit becomes less available) while demand [I]decreases[/I].

great post like.

great post like.