Dollar Gets Whacked In Asia!

* China issues statement..
* Did Traders finally sober up?
* It’s all about the Jobs Jamboree tomorrow..
* Gold gains $4.80

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

Good Day. And a Tub Thumpin’ Thursday to you! Well, we made it here.. Got out of Dodge before the snowfall arrived, but had to sit through some long delays, and caused a later arrival than was scheduled. No biggie, just a little less sleep for someone who has had trouble with sleep, doesn’t sit well with me this morning. In fact, when the alarm sounded, I turned it off! But, that internal clock in me, said, “Chuck, get yourself up and quit your complaining”. So, here I am! Sam I am! Oh, don’t start with that stuff, Chuck! I’ve got some more mind blowing for you, news this morning about a previously released Wikileaks cable. And The Walker Brothers greet me this morning with their song: The Sun Ain’t Gonna Shine Anymore.

Right out of the starting gate today, we have the dollar turning around and running away from the currencies and metals, after spending most of the trading days since the election, being the bully. From what I can tell this dollar weakness that came about in the Asian session, isn’t about the Fed’s Meeting Minutes that printed yesterday afternoon, as there was nothing in there that was surprising, but more about traders and investors coming to the realization that they had gone too far with the “Trump Trade”. I talked about this yesterday, the optimism that had gotten too far out of line, as there was nothing concrete to stand on, just promises.

So, the dollar is much weaker this morning, but was actually even weaker in the Asian session, and has seen some profit taking in the European session, but the Dollar Index is still much lower than it was yesterday, and at the start of the week/ year, as it trades at 102.46 this morning. And it’s about time someone sobered up and realized that they were trading on promises, and not data, fundamentals, or logic. Now, don’t get me wrong here, IF the President-Elect’s plans get passed, and implemented, in a timely manner, then we can all sit around and see if they do what they are put in place to do, and make trading decisions then, but until then, let’s all just calm down.

I say all that because, in recent years, the policies that were implemented didn’t exactly go what they were intended to do, did they? No. they didn’t. So, in Asia overnight, the Chinese Gov’t issued a statement that they wanted the Chinese people to load up with currency ahead of the lunar Holiday Week. Yes, when the Chinese take a Holiday, they take one! I think the Chinese Gov’t had an anterior motive in making this statement. You see, if the population listens and loads up on currency, it puts a tourniquet around the bleeding of capital outflows that have been a real problem for the Chinese lately. But, whatever the reason for the statement, it got the Asian markets thinking about all this dollar strength that had built up, and decided to do something about it!

I’ve got a doozy of a report on Gold in the FWIW section today, so please stick around for that. But other than that, there’s not a lot else going on today. We will see the ADP Employment report and the Services ISM (PMI) which both are looked at for clues about tomorrow’s Jobs Jamboree. But other than those prints, the U.K. will print a similar services PMI, and that’s it. There are a few data prints that will come tonight, like The Aussie Trade Balance, but that’s tonight, not this morning, so we’ll have to wait.

Speaking of the Jobs Jamboree tomorrow. And yes, I still don’t care about it any longer. Right now, the “experts” have the number of jobs created in December at 183,000. The key in my mind is to look under the hood, and see how many of those 183,000 jobs were seasonal / part-time jobs. Of course we have no idea what kind of “magic” the BLS will come up with tomorrow.

The Fed’s FOMC Meeting Minutes printed yesterday, and like I said above, didn’t really have that much new in them except one statement that could have set off fireworks, but I don’t think the markets really paid that much attention. the Fed members did say that they had concern over the “considerable uncertainty” surrounding the potential policies of the President-Elect.

Isn’t that what I said for weeks ahead of the FOMC meeting when they hiked rates last month? Why, yes, Chuck, you did say that it would behoove the Fed members to wait for the first 100 days of the new President to get a good handle on what his policies will be, before hiking rates. But did they listen to me? Shoot Rudy, why would the Fed listen to me? I’m just a country bumpkin our here in the hinterlands trying to make sense of all these shenanigans. But the point needs to be made here. The Fed members showed concern with the “considerable uncertainty” , but still hiked rates. Hmmm.

The euro climbed above 1.05 last night, but has drifted back below the figure in the European session. I got to my little place here in S. Florida and fired up my laptop, and checked on everything last night, and saw that the euro was 1.05 and change, and then had to find out what was going on, which led to my late night. UGH! In the Eurozone yesterday, Ireland printed a strong Retail Sales report but it was very stale (from Nov). At least it was positive gaining 4.3% VS 4.1% a year earlier.

There will be elections this year in France and Germany and the Netherlands, and we could see snap elections in Italy and Greece. So, these elections could lead to a lot of volatility in the euro this year, folks. Of course, the key to the euro is how does the dollar trade? Always remember that the euro is the offset currency to the dollar, so dollar weakness shows up in euro strength, no matter what the fundamentals are in the Eurozone. If the fundamentals are bad, the euro strength is just backed off a bit, but still there.

In Brazil yesterday, they printed their latest Industrial Output data, which recovered from the previous month’s -1.1% drop, and rose to 0.2%… It’s been pretty quiet in Brazil after last year’s goings on with the Olympics, and the impeachment of the President. The Brazilian real though hasn’t really moved much since those two thing ended, and that’s surprising to me.. I would have thought that by now the real would be weaker. I think traders are very impressed with a couple of things here. 1. The larger than the rest of the world interest rate differential, and 2. The plans of the interim gov’t to promote trade.

And yesterday I mentioned that the Mexican peso had weakened a lot, and was trading with a 21 handle, and a reader sent me a note telling me he was loving the peso drop because he spends his winters in Mexico. And he’s right, for people that travel, the weaker currency levels are really helping them to stretch their dollars further.

Well, there’s news that Bloomberg printed yesterday regarding a trader that pleaded guilty of conspiracy to rig currency prices. “Jason Katz, a former Barclays Plc currency trader, admitted conspiring to fix prices in the foreign-exchange market, the third individual to be charged and the first to plead guilty in a long-running U.S. criminal investigation into the rigging of currency rates.” You can read the whole article here: https://www.bloomberg.com/news/articles/2017-01-04/ex-barclays-trader-jason-katz-pleads-guilty-in-currency-probe

I just shake my head in disgust, and disbelief that this stuff goes on. The currency market is a $5 Trillion a day market, it’s bigger than bonds, stocks, you name it, so to rig prices one would have to control a large sum of dollars. UGH!

Gold gained $4.80 yesterday and is down a couple of bucks in the early morning trading. Remember a couple of months ago, when I told you that Turkey’s President, Erdogan, had issued a request to the population to buy Gold? I said then that he wanted to rid the dollars in the country. Well, I guess the population listened to him, because Gold imports to Turkey jumped 36.7 tonnes in December, a 688% increase over the number a year ago! So, imports to India may be on the downslide, but no so in Turkey!

Well, a quick look at the Debt Clock (http://www.usdebtclock.org/index.html ) tells me that it won’t be long, yeah, yeah, yeah, year, it won’t be long, yeah, yeah, yeah, yeah, Oh stop that Chuck! It won’t be long until we reach $20 Trillion in national Debt.. I’ve come to the realization that people just don’t seem to get the gist of this $20 Trillion in debt thing. I’m telling you right, here, right now (Jesus Jones) that any thoughts that we can grow our way out of this debt is preposterous! Right now, the U.S. is borrowing to pay the interest on the money they’ve already borrowed. And then add in higher interest rates. Just last month the U.S. Treasury Department sold $28 Billion in 7-year Treasury notes at a yield of 2.24%… That sounds pretty cheap, right? That is unless you compare it to what they borrowed at a year earlier, and 2.24% is nearly double that rate! And it’s only going to get worse, folks!

And then people wonder why countries like Russia and China have taken to accumulating large sums of Gold? For those of you keeping score at home. In the last 10 years. Russia has increased their Gold reserves 203%, and China has increased their Gold reserves 570%… How much have you increased your Gold reserves? Kind of sounds like those credit card commercials, eh?

To recap. The dollar got whacked in the Asian session last night, as China called on the population to buy renminbi ahead of their Lunar Holiday week, which caused a shortage of renminbi, and got traders to sell dollars, and then realize that they had gone too far too fast with dollar strength. The dollar has come back a little in the European session today. Not much going on in the currencies other than that overnight activity. It’ll all be about the Jobs Jamboree tomorrow.

For What It’s Worth. I know I built this up but it’s worth it, folks.. get a fresh cup of coffee and get settled in your chair, for this is a balloon buster if you ask me. Yesterday, I received an email from the GATA folks, and then Ed Steer highlighted it in his letter this morning, news that Wikileaks had released about a State Department cable published by Wikileaks describing London dealer expectations at the end of the prohibition on physical Gold holding in the U.S. In 1974, including reactions to transitional measures authorized by Congress and taken by the U.S. Treasury to auction Gold. The Cable reads as follows:

“The major impact of private U.S. ownership, according to the dealers’ expectations, will be the formation of a sizable gold futures market. Each of the dealers expressed the belief that the futures market would be of significant proportion and physical trading would be minuscule by comparison. Also expressed was the expectation that large-volume futures dealing would create a highly volatile market. In turn, the volatile price movements would diminish the initial demand for physical holding and most likely negate long-term hoarding by U.S. citizens.”

This cable was sent to the U.S. State Department from the U.S. embassy in London and signed for by the embassy’s chief of staff, Ronald I. Spiers. I have the link to the Wikileaks page on this, that has more information on the cable for you and you can find that by clicking here: https://wikileaks.org/plusd/cables/1974LONDON16154_b.html

Chuck again. Well, I actually never left you, but you know. Whew! So.. how about that for a doozy of an article? And we’re talking about all those years ago, right? 1974.. I had given up my quest to be rock star. And Terry Jacks had a #1 Billboard song titled: Seasons in the Sun.. in other words. a long time ago!

Currencies today 1/5/17. American Style: A$ .7288, kiwi .6963, C$ .7513, euro 1.0490, sterling 1.2309, Swiss $ .9792, . European Style: rand 13.7181, krone 8.5840, SEK 9.0807, forint 294.06, zloty 4.1705, koruna 25.7498, RUB 60.70, yen 116.66, sing 14367, HKD 7.7543, INR 67.86, China 6.9415, peso 21.50, BRL 3.2453, Dollar Index 102.46, Oil $53.20, 10-year 2.45%, Silver $16.29, Platinum $946.10, Palladium $719.85, Gold $1,160.05, and SGE Gold $1,183.49

That’s it for today. Geez Louise I don’t know what has happened to college basketball in our state! Both Mizzou, and SLU have awful teams, and I mean awful! I watched my beloved Mizzou Tigers miss 3 layups last night! Layups! Uncontested I might add! UGH! And I had to turn off the SLU game the other night because they were just plain awful! Oh, well, there’s 38 days until pitchers and catchers report to Spring Training. At this time of winter I’m reminded of what Rogers Hornsby said, “People ask me what I do in winter when there’s no baseball. I’ll tell you what I do. I stare out the window and wait for spring.” Well, I don’t think I upset anyone yesterday on the plane. I only coughed a few times, and no lung came forward, so that was good. They roll the sidewalks up early here where I am, so when we arrived last night, there was really nowhere to go to eat good food. So, I’m hungry as a bear this morning. I hear it’s snowing back home. Good for them! It had been so raw and cold the past couple of days that it either needed to snow, or leave! The Allman Brothers (it’s a Brothers day) take us to the finish line today, with their song: Southbound.. and with that you need to go out and make this a Tub Thumpin’ Thursday! Be Good To Yourself!

Chuck Butler
Managing Director
EverBank Global Markets
Editor of A Pfennig For Your Thoughts
1-800-926-4922
https://www.everbank.com