A Wide-Based Dollar Selloff.

* Currencies rally!.
* Metals blow the lid off! .
* Spain & Portugal get two more years!.
* Chuck loves the Olympics.

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

Good Day. And a Wonderful Wednesday to you! This letter is arriving very late this morning, due to difficulties I’ve had getting my motor started today! I’m writing from home today, because in a couple of hours I report to the hospital for a day of scans. They doctors want to know what’s going on since my last scans in March. You may recall those results, were Fantastico, and I was on Cloud 9 for a couple of days. I don’t expect the same kind of news, but who knows? The Allman Brothers greet me this morning with their song: Rambling Man, which I do believe was their first radio hit song. Cardinals stumble again last night. A reoccurring theme all summer long. UGH!

Well, the drifting of the currencies yesterday ended overnight, as someone, somewhere, decided that there was little to go on with dollar strength, and so there’s a wide-based dollar selloff this morning. The traders had that V-8 moment, and did the head-slap and said, “The Fed isn’t going to hike rates, so why are we buying dollars?” And the wide-based dollar selloff began. There’s not much going on besides this “new revolution” by traders, there’s some news from the Eurozone, and China, but it’s not earth-shattering, and on a real busy day for news, I probably wouldn’t even get to these stories, but. Until everyone gets back from their August holidays, including the Central Banks, slow days are the call, and we need to get used to that, for August always seems to be a long month to me.

So, Spain and Portugal get handed get out of jail free cards. That’s basically the gist of the news from the Eurozone, as Spain and Portugal will NOT be fined for their inability to get their debt positions below 3% as mandated. In fact, they were given 2 years to get their ducks in a row, not just 1 year, but two years! Apparently, it would have been too difficult to do in 1 year, you think? I chuckle at this stuff, because, it’s basically how kids are raised these days… I’m so glad my raising kids job is over, because I would stand out like a dinosaur these days.

The euro traders saw this move to allow the two Club Med countries two years to get their debt in order, as euro-positive, and so the euro has been allowed to rally, but trust me on this, the euro’s rally is more of a case that the dollar is getting sold.

There’s an article on the Bloomberg this morning about how China is preparing to distribute the renminbi (they call it the yuan, basically because, as I always say, yuan is easier to spell and say for the media than renminbi) on a wider scale. Basically the news is that the Peoples Bank of China (PBOC) met with onshore lenders to discuss allowing them to trade in the offshore renminbi market. Another baby step for China in their goal of a wide distribution of the renminbi, that prepares them for having the next reserve currency.. That’s my opinion, has been and will remain to be, and could be wrong.

The Reserve Bank of New Zealand (RBNZ) meets tonight (tomorrow morning for them) and it is a foregone conclusion that the RBNZ will cut the OCR (Official Cash Rate) 25 Basis Points (1/4%). I told you earlier this week that there was a faction of observers that thought that RBNZ Gov. Wheeler, might go 50 Basis Points (1/2%) and then call an end to the rate cut cycle. So, here’s my thought on the whole thing. 1. I don’t believe the RBNZ needs to cut the OCR at all. 2. That it will be 25 Basis Points . 3. I don’t see 50 Basis Points at all, but either way, I do believe that this will be the end of the rate cut cycle, but I doubt Wheeler will say that, for if he did, kiwi would rally. It appears to me that the 25 Basis Points rate cut is already priced into kiwi. That would mean that Wheeler would have to come out and give the markets reason to keep a lid on kiwi and I have no doubt that he will.

So, did you know that going forward, the Olympic gymnastics teams will only be 4 members not 5.. That makes last night’s U.S. Olympic gymnastics team the “Final Five”. Remember the “Fab Five”? Oh well, I went down this rabbit hole, so while I’m down here, I might as well talk some more about it. I forgot to mention, yesterday, the amazing swim that Lilly King had the night before. What a performer! In the semis, she basically told the world that the Russian swimmer wasn’t number 1, and then even called the Russian swimmer out for cheating/ doping, and in the finals beat the Russian swimmer. You’ve got to love the chutzpah of the U.S. swimmer, She basically said, “no you’re not #1″ and then went out and beat her. Loved it! And Secretariat, I mean Katie Ledecky won again, what stud swimmer! And Michael Phelps won two more Gold medals 20, and 21 for him.. .simply amazing.

Alrighty then, that was your Olympic moment. For those of you not interested, sorry. Alrighty then, August always brings us the heat of summer, and. come on, I know you know this. The Fed’s Jackson Hole Boondoggle! This will be a real bummer of a boondoggle this year, as there’s nothing good to talk about anywhere, unless they want to discuss the Olympics! HA! Take for instance the fact that Fed Member Jerome Powell, recently indicated that he has become alive to the idea and increasingly worries on it, that we are in an era of weaker growth, lower growth, for a longer period of time. That worries me more than it used to.” He went on to add that “to achieve the forecasted growth, rates have to be lower than he thought before.”

Now I just told you yesterday that the markets shouldn’t get all lathered up over regional Fed President’s remarks, for they are not a part of the “real decision making”. So, I wouldn’t put a lot of stock in Powell’s remarks, but they do lend a thought to what will be discussed at the Fed’s annual Jackson Hole Boondoggle.

The U.S. Data Cupboard yesterday, had the Productivity Costs that I explained could be used as an indicator of future inflation. Well. The 2nd QTR Productivity growth unexpectedly declined -0.5% VS the 1st QTR -0.6% decline. So, no future inflation here, so just move along now, for these are not the droids you’re looking for!

There’s nothing, absolutely nothing, say it again, to speak of in the Data Cupboard today, except the EIA Petroleum Data. That’s a weekly report, so it goes up, it goes down, I don’t put much stock in the report unless there’s a trend, of which there hasn’t been one lately. Tomorrow’s Data Cupboard doesn’t have much either, but Friday’s will have the latest U.S. Retail Sales report for July, which should be OK, given that there will be some Back to School buying in those numbers.

Well, looky here! Platinum is up $36 this morning, and Palladium is up $45! Can you say, pent up frustration being released? I thought you could! Gold is up $12 in early morning trading, and Silver has gain 50-cents. Give the mouse a cookie, right? These metals have been building pressure under the lid the not for profit sellers have had on them, and today the pressure blows the lid off! Why? Well, I already told you. The thought in the markets today is that the Fed isn’t going to hike rates any time soon. I wish I could tell you more, but that’s it, that’s all. Hey! Don’t look a gift-horse in the mouth, right? Just go with it! (which is a very good, funny movie!)

To recap. Chuck is running late today, and has a day of scans scheduled. other than that, we just have a wide-based dollar selloff.. that’s all. HA! Yes, the dollar is getting sold today, on the thought that the Fed can’t hike rates, which has been my thought all along, but nobody listens to me! The Eurozone has given Spain and Portugal two years to meet their debt requirements, and China announces another plan to gain wider distribution of the renminbi. The metals are looking very good this morning, could be a blow out day for them.

For What It’s Worth. This is an interesting article that I found on the Bloomberg regarding foreign appetite for U.S. Treasuries waning. You can find the entire article here: http://www.bloomberg.com/news/articles/2016-08-01/foreign-appetite-for-u-s-securities-has-taken-a-drubbing

Or, here’s your Snippet: “It wasn’t supposed to be this way.

When the Federal Reserve hiked benchmark rates in December, the initial jump in the short-end of the nominal U.S. yield curve raised expectations that foreign buyers would snap up the country’s assets, thanks to their yield relative to those of other developed markets ravaged by low policy rates.

In fact, net foreign flows to the U.S. have been decidedly weak this year, thanks to an exodus by foreign central banks and sovereign wealth funds, who’ve been dumping U.S. securities in order to raise cash to put to work at home.

In May, official institutions abroad raced out of U.S. stocks and bonds with $26 billion of outflows. Private buyers abroad were, by contrast, net buyers of U.S. securities, but that wasn’t enough to keep the total positive: foreign flows out of U.S. securities totaled $11 billion, according to the most recently available data in May, sharply reversing April’s $80.4 billion of inflows.

Don’t let April’s high number fool you: the historic significance of this weak flow story is laid bare by analysts at Ned Davis Research Inc., led by Joseph F. Kalish, in a research report published Thursday. Looked at on a rolling 12-month basis, inflows to the U.S. from foreign investors fell to $47.2 billion as of May, which is the second-lowest reading since the same month of 1992, the analysts say.”

Chuck again. Boy if this continues, the U.S. Treasury could be in for a real come to Jesus moment. And bond holders would too, because yields would rise under a situation like this, because you have to attract foreign investors to your bonds, and you can’t do so with yields so low. The article does say that not all of the fall in foreign ownership of Treasuries is a reflection of the U.S. and it’s yield curve. Some of it can be attributed to the need to dump Treasuries to support their currencies and stem capital flows. Think China here.

Currencies today 8/10/16. American Style: A$ .7732, kiwi .7247, C$ .7685, euro 1.1190, sterling 1.3090, Swiss $1.0244, . European Style: rand 13.2610, krone 8.2870, SEK 8.4795, forint 277.85, zloty 3.8140, koruna 24.1525, RUB 64.58, yen 101.20, sing 1.3390, HKD 7.7567, INR 66.69, China 6.6331, peso 18.33, BRL 3.1455, Dollar Index 95.55, Oil $42.51, 10-year 1.54%, Silver $20.35, Platinum $1,191.58, Palladium $739.25, and Gold. $1,359.00

That’s it for today. See now that wasn’t so bad was it? I know, I don’t want this to become habit, and tomorrow should be right back to the normal schedule. There’s a birthday today in the office. Lucy Evans. Happy Birthday, Lucy! See? Told you I was going to try to be better at that! I still can’t believe I missed my best friend’s birthday on Monday though. Funny thing he told me “no worries, I had forgotten it was my birthday too, until my daughter called me”. The music of Al Stewart (One of my faves) takes us the finish line today, with his song, “Song On The Radio”. You and me baby, I saw you there. Well, I’m off to the hospital where the first order of business is getting an IV put in me so they can fill me full of radio-active juice. See I know how to have all the fun, don’t I? HA! I hope you have a Wonderful Wednesday. Be Good To Yourself!

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