A Week Of Central Bank Meetings.

* Dollar is in driver’s seat.
* Euro get traded on Greek drama.
* Canada prints Budget Surplus!.
* Chuck stirs up hornet’s nest.

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

Good day.. And a Marvelous Monday to you! And Welcome to June! Well, Pfennig tradition calls for this song to start June. June is bustin’ out all over, all over the meadow and the hill, buds are bustin’ out of bushes, and the rompin’ river pushes every little wheel that wheels beside the mill. I like to drag that one out of the memory banks for those of you who think I just an old rock-n-roller! Well, I’m not feeling so bustin’ out all over this morning, so once again, I’ll remain at home and hope it all settles down soon.

The fun (NOT!) in the markets lately isn’t going to settle down any time soon, and especially this week, as we have the Reserve Bank of Australia (RBA), Bank of England (BOE), European Central Bank (ECB), Brazilian Central Bank (BCB), and Reserve Bank of India (RBI), all meeting this week. And while most people out there are still saying that Australia will cut rates at this meeting, I continue to think not. In fact, I suspect that only the BCB and the RBI will do anything with rates at their respective meetings this week, with the BCB hiking rates, and the RBI cutting them.

We also have the first loan tranche to the IMF from Greece due on June 5th. As I told you last week there are 4 loan tranches due this month from Greece to the IMF, so every week we get to go to the edge of the cliff, look over the side, see the deep fall, and then back away. And the euro will be tied to the goings on with Greece.. For instance, today, the euro is off by ¾’s of a cent, after nearing 1.100 on Friday. On Friday, there were still hopes that Greek PM Tsipras was telling the markets the truth that a compromise was agreed to and being drafted. But, as time went on, those words fell on deaf ears in the markets, and we were back to no agreement, and coming down to the cheese that binds once again for Greece.

I think this is a good time for me to remind everyone that I’m probably one of the few that believe this, but I truly believe that there will be a deal to keep Greece from defaulting, and it will be an 11th hour deal, that has everyone sweating profusely but happy when it’s put to bed, even though all the creditors did was kick the can down the road. But without this Greek debt thing hanging over the Eurozone like the Sword of Damocles, the focus can be put back on the getting the Eurozone out of their recession.

And here’s a scenario that I think we’ll see. Greece will ask for all 4 loan payments due this month to be rolled together, and paid in one lump sum at the end of the month, thus giving them another whole month to carry out their loan drama. UGH!

Speaking of being of the few. I sure stirred up a hornet’s nest yesterday with my thoughts on the Chinese renminbi in the Sunday Pfennig. That’s a good thing, even if most of the responses were not in agreement with my thoughts! I made you think, I made you think! HA! Well, only time will tell, folks. And if you’ve been keeping score of the Chinese moves since 2008, like I have, then you probably see it like I do. You know, the thing that most people miss about all these moves by China, is that their main goal is to remove the dollar as the reserve currency, so maybe the renminbi doesn’t rise to take over the reserve status, the main thing is that the dollar isn’t the reserve currency any longer.

OK. let’s get off that bus, right there, and get on the one going uptown. In addition to the Central Bank meetings this week, and the first tranche of loan payments due, there will also be a plethora of economic data prints all over the world. Here In the U.S. the ISM Manufacturing Index for May will print today, and carry the most weight. more on U.S. data later. Around the world we’ll see prints like GDP reports, inflation reports, and manufacturing reports. The ones that most people will be watching are those from the Eurozone, so don’t worry, I’ll keep on top of those for you. I think we’ll see more healing from the Eurozone economy this week, which will contrast with what’s going on in the U.S.

The RBA will kick things off for the Central Banks this week, when they meet tonight. As I said above I don’t expect a rate cut, but that won’t stop the RBA from kicking the Aussie dollar (A$), so watch for that. Later this week, Aussie 1st QTR GDP will be revised, but probably not by much and remain around 2% Year on year. No great shakes and the RBA would love to be cutting rates, but, there’s a little thing that I talked to you about last week, called a Housing Bubble going on, and rather than fueling that bubble, the RBA has to keep their powder dry.

The best performer overnight is the Indian rupee. It’s been some time since I last said that, eh? But the rupee has been quite stealth-like in gaining ground lately. As I said above, I do believe that the RBI will cut rates at their meeting this week, but. I’m also convinced that the rate cut is already priced into the rupee, otherwise we wouldn’t be seeing the rupee at the top of the pile today.

The worst performer is the Russian ruble. Russia printed their PMI (manufacturing Index) for April last night, and it showed a larger than a bread box drop, from 48.9 to 47.6. The Russian economy is facing a recession straight on. But to the Russian leaders, they have to believe that without the sanctions on them they would be growing just fine, and so they view this slowdown as temporary. But that won’t be enough optimism to keep the Central Bank of Russia (CBR) from continuing to remove the emergency rate hikes from late last year. And while that (lowering rates) will put pressure on the ruble, the overall picture here is that the rate environment will still be far greater in its differential to other countries’ rates. Eventually the markets will see that.

I did tell you above that I thought the Brazilian Central Bank (BCB) would hike rates at their meeting this week. Inflation in Brazil continues to be a problem and the BCB still believes that interest rates need to go higher. In fact there was a report from Brazil this past weekend that an anonymous informant told reporters that the BCB sees no ceiling for rate increases. Now, I’m sure that statement was made to shock the monkey, I mean the markets. The real has been a real disappointment again lately, after showing it had some moxie in April, the May results were just plain awful and once again the real is in the dumps.

Well, looky there, while it was not intentional, I talked about the BRIC currencies today. All I’m missing is the “S” that stands for S. Africa, which hasn’t had any market worthy news in a month of Sundays. When the BRIC countries invited S. Africa to the club, they not only added an S to make them the BRICS, but also added another “R” currency, adding the rand to the real, ruble, rupee and renminbi.

Last Friday, Canada printed a Budget Surplus! For the fiscal year ended in March, Canada printed a Surplus of $2.9 Billion VS the forecast of a $2 Billion deficit! WOW! But once again, fundamentals were lost on the markets, and the Canadian dollar / loonie couldn’t get any wind in its sails from this report, as it should have. Oh well, just shows to go ya, what a country can do when they cut spending like the Canadian Gov’t did last year!

Gold is down $5 this morning. I think the blue light specials are about to be lit up.. I was reading an interesting article this weekend about German buying of Gold. It was an interesting take on how Germany has outpaced the rest of the West with physical Gold buying in the 1st QTR of 2015. here’s how they said it on Google+, that German Gold investment increased by 20%, compared to the same period last year, while U.S. Gold demand fell12%… Now, Switzerland still reigns as the top Gold per capita country in the West, Germany stacks up pretty good. And in fact when you compare Germany to the U.S. on a per capita basis, Germany is actually buying 12 times more physical Gold per capita than the U.S.

I found this interesting, because the last research I did (last year) didn’t show the Western countries doing any Gold accumulation, but then we had Germany demand repatriation of their Gold held in N.Y City, The Austrians demand repatriation of ½ of their Gold from the Bank of England, and now this data showing Germany stepping up its Gold accumulation. It must be a case of monkey see, monkey do, eh?

And while all the physical Gold accumulation by Central Banks around the world hasn’t really done anything to help the price of Gold rise at this time, I still think Gold is a very safe asset, which is why the Central Banks are accumulating it. But when does all this physical accumulation boost the price of Gold? Well, I think it all pays off when the next global crisis occurs. That will probably be a liquidity crisis. And then everyone will rush to buy Gold, but it won’t be available, and then we all know what that does to the price of an asset, now don’t we!

Well, the U.S. Data Cupboard will be quite busy today and this week, starting off with two of my fave prints: Personal Income and Spending, and ending the week with the Jobs Jamboree, and in between the ISM, Factory Orders and other prints.

Friday’s Data Cupboard was quite ugly for the U.S. economy, as the second revision of 1st QTR GDP was revised to a negative 0.7% from a positive 0.2% in the 1st revision. So, let me see, the actual first print of GDP was 1%, then revised down to 0.2%, and now to -0.7%… So, nearly a 2% difference. But the dollar sure got a rise from the original print! But I told you then that when all the revisions were completed that the drop in the 1st QTR from the 4th QTR would be HUGE. For those of you keeping score at home, the 4th QTR GDP final print was 2.2%… So, it sure looks like once again, I nailed the GDP drop. 2.2% to -0.7%… YIKES! And don’t go away yet, if you order now, I’ll send you the forecast for the 2nd QTR, which will be less than 1% Transitory my. ask me no more questions, I’ll tell you no more lies, the boys are in the girls’ room. etc. etc.

To recap. The dollar is back in the driver’s seat today, with only a couple of currencies gaining ground VS the green/peachback. The rupee is the best performing currency overnight, while the ruble is the worst performing. Chuck stirred up a hornet’s nest with his thoughts in the Sunday Pfennig. A ton of Central Bank meetings this week, along with tons of economic data reports from around the world will be this week. In addition, the first loan tranche of Greece’s loan from the IMF is due on Friday, June 5th. Will Greece ask for all 4 payments due this month to be rolled together to be paid at the end of the month? Chuck thinks so.

For What It’s Worth. So. I’m just playing along with the people that think the Fed is going to raise rates soon (you all know my thoughts on that, but for fun, let’s just play along with them here). This story was on the Bloomberg from Friday, and I thought is to be interesting. You can read it all here: http://www.bloomberg.com/news/articles/2015-05-28/wall-street-s-young-guns-brace-for-first-big-test-as-fed-looms

“Magdy El Mihdawy remembers exactly where he was when the stock market tanked in 2009.
He was on Spring Break in Florida — as a 22-year-old undergrad.

Today, El Mihdawy is part of a Wall Street demographic whose own trial by fire awaits: traders who’ve never known anything but a post-crisis world of rock-bottom interest rates and ever-rising markets.

This youth brigade — call it Wall Street’s class of 2009 – – is about to learn what higher rates from the Federal Reserve look like firsthand. Their inexperience has left older, more experienced colleagues wondering how these relative youngsters will fare.

No one is suggesting that Wall Street traders are any less capable than they were in the past. But what’s remarkable is the sheer number of those who started their careers after the Fed dropped rates close to zero in 2008.

While the average Wall Street trader is 30 years old, about 30 percent started within the past five years, according to Emolument.com, a salary comparison website, which compiles data from its 50,000 financial services users. And two-thirds of traders have never seen a full Fed tightening cycle.”

Chuck again. I thought that to be very interesting that these people have never seen rates tightening. It’s been that long folks, since we saw a rate hike. Who would have thought that it ever got to this in the first place here in the U.S. and then to see it carry on for 6 years.

Currencies today 6/1/15. American Style: A$ .7635, kiwi .7125, C$ .8010, euro 1.0925, sterling 1.5225, Swiss $1.0575, . European Style: rand 12.2615, krone 7.9040, SEK 8.5640, forint 282.90, zloty 3.7770, koruna 25.1150, RUB 53.38, yen 124.15, sing 1.3520, HKD 7.7560, INR 63.70, China 6.1207, pesos 15.42, BRL 3.1775, Dollar Index 97.38, Oil $59.71, 10-year 2.12%, Silver $16.68, Platinum $1,106.62, Palladium $777.50, and Gold. $1,187.35

That’s it for today. Cardinals take 2 of 3 from the Dodgers, so that was a good weekend. We had rain all weekend, and now the temperatures have slipped again. This is unbelievable for June 1st. yesterday, all the kids and grandkids were here to celebrate Darling daughter, Dawn’s husband, Jerry’s birthday.I think everyone had a grand day, I know the grandkids sure did! Well, now that I stayed home, my stomach seems to have settled down.. UGH! It sure didn’t feel that way 2 hours ago! Oh well.. Paul McCartney & Wings are playing their song: My Love on the iPod right now. A good slow dancing song. You know, Slow dancing, swaying to the music. Ahhh, the great Johnny Rivers! Got to spend a couple of hours on Friday afternoon with my best old friend from 2nd Grade, Mike. He’s looking great! There’s a day game on Wednesday. I’m just saying, wink, wink. Maybe some tickets will show up on my desk, magically. HAHAHAHAHA! So, Happy Birthday, Jerry, hope your day is grand, and I hope we all can have a Marvelous Monday!

Chuck Butler
Managing Director
EverBank Global Markets
Editor of A Pfennig For Your Thoughts