A Quiet Beginning

* Frank’s intro
* Consumer confidence takes a hit
* Dollar in tight range
* Brexit talk

And Now, Today’s A Pfennig For Your Thoughts.

Good day. And welcome to Monday morning. As Chris mentioned on Friday, I have the reins today and tomorrow with my skinny version of the Pfennig, but don’t worry, Chuck will be back in the saddle on Wednesday morning. Friday turned out to be fairly quiet and this holiday shortened week looks to follow in the same footsteps. Its still tough to fathom Easter is staring us down at this point since it seems just like yesterday we were ringing in the New Year. With that said, let’s kick things off with Frank and get right into it.

“For starters let me say that the Paso Peruano was spectacularly fast and comfortable on the 24 mile ride. We started up the river, across some high sand dunes, through Finca Chimpa then made the turn for the long run down the Calchaqui Valley. Seven hours later we arrived no worse for wear at our destination near the hotel in Colalao del Valley. I know for sure that had I been on a quarter-horse I would still be sore today. The smooth ride and the comfortable saddle made the trip a snap. Riders on Criollo, another fine breed, trailed in three hours later.

Along the way I was able to converse at length with a couple Argentines. I’ll update this comment with a longer article in the Sunday Pfennig on April 3rd. Both were forcefully optimistic about the prospects for Argentina under the newly installed President Macri. After about 80 years of disastrous management by military and Peronist administrations, people see great things ahead if he and his party are able to make change and maintain power. The populous appeal of free money for everyone under the Peronist peers over their shoulders for the opportunity to reclaim power. Others joining us for an asado later in the evening echo’d these comments.

Long time friend Karim Rahemtulla (http://nondollarreport.com/authors/) stopped by for a couple days and gave a short talk on the US dollar to a group here at the Estancia de Cafayate. At first he emphasized that global diversification should be paramount. But germane to the Pfennig (and paraphrasing his view) – Karim felt that a wide array of currencies will likely appreciated against the US dollar over the next 18-24 months. A longer conversation while hiking in the Quebrada de Cafayate revealed his view that the stage of QE and stimulation in Europe, Japan, and the ripple effect across the Pacific Rim and Canada suggest that some of these currencies could well gain over the next couple years. Hope so.”

Thanks again Frank. The only bit of US economic data on Friday was the initial reading of the March U. of Michigan consumer confidence report, which unexpectedly fell to a five month low, even though stocks have been steadily moving higher. It seems as though higher prices at the gas pumps have taken a bite out of consumer sentiment so far this month as the measures of both current and future expectations fell to several month lows. US data this week will be limited at best with some housing numbers and the durable goods report taking center stage.

With nothing much on the news wires to speak of, the dollar was able to gain back some lost ground after a decent bout of selling for most of the week. Chris already talked about this, but the Brazilian real ended Friday with a gain of 1.25% and the top spot on the currency return chart. Other than the BRL and Chinese renminbi, all of the other major currencies finished the day lower. While the Canadian dollar had a gain in early trading after January retail sales surprised to the upside, it finished in negative territory amid broad dollar strength and lower oil. The Russian central bank kept rates on hold, which came as no surprise, but their hawkish stance caught some off guard after they expressed a desire to maintain tight monetary policy.

As I came in this morning, the dollar is trading in a very tight range so nothing much to mention as we begin the week. The rand and pound sterling, which are both sitting on 0.50% losses, are the only two currencies that seem to have found a path so far. I ran through the various headlines but its pretty barren out there today. Continued speculation about a ‘Brexit’ seems to be the story of the day after a senior member of the UK government resigned which just adds to the overall uncertainty and it looks like politics will be the main driver for this currency over the next few months. There was a report by the Confederation of British Industry that was recently released indicating an exit from the European Union could cost 100 billion pounds in lost economic output and 950,000 jobs by 2020.

That’s it for today, so until tomorrow, Have a Great Day!

Currencies today 3/21/16. American Style: A$ .7608, kiwi .6775, C$ .7661, euro 1.1275, sterling 1.4393, Swiss $1.0322. European Style: rand 15.3035, krone 8.3675, SEK 8.2090, forint 275.05, zloty 3.7773, koruna 23.962, RUB 68.1650, yen 111.52, sing 1.3580, HKD 7.7535, INR 66.5005, China 6.4824, pesos 17.3855, BRL 3.6240, Dollar Index 95.093, Oil $38.97, 10-year 1.89%, Silver $15.80, Platinum $969.40, Palladium $586.97, and Gold $1,245.60

Mike Meyer
Vice President
EverBank World Markets