Dollar Index pushes higher toward triple digits.

* Dollar index hits 99.99.
* Weak China data hammers commodity currencies.
* Elections weigh on the pound.
* Cards home opener.

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

It is raining outside, not good news for Cardinal fans who are headed down to the home opener later this afternoon. Here in St. Louis the Cardinal’s home opener is an ‘unofficial’ holiday and the weather people say these thunderstorms which are currently rolling through the area will vacate by noon making way for a beautiful opening day. Chuck spent the weekend in Los Angeles and had to make an emergency call to the bullpen this morning, so this morning’s Pfennig will be short and sweet and probably a little later than usual.

As I turn on the trading screens this morning I see the dollar index moved back up to within a hair of the 100 level overnight after poor trade data out of China and election uncertainties in the UK sent currency investors running to the dollar. Monday’s early morning currency trading was a continuation of the strength we saw in the dollar over the past week as investor sentiment started to again focus on the possibility of a mid-year interest rate increase here in the US. Data out of China showed Chinese exports fell 15 percent year on year in March while imports contracted at their fastest pace since 2009. Expectations were for a 12 percent increase in the level of Chinese exports, and the 27% difference was an absolute shock to investors. China has been setting structural changes in motion which are designed to shift their trade based economy toward a more balanced one by increasing demand from a growing middle class. But unfortunately imports are falling along with exports – a dramatic slowdown across the board which is causing some economists to predict even more stimulus efforts from China’s leaders.

The disappointing trade data is hammering the commodity currencies of Australia, New Zealand and South Africa, all of which are down over 1% vs. the US dollar in early trading. Each of these countries count on exports into China to sustain their economy, so a slowdown in their number one destination for exports logically puts pressure on these currencies. And the Chinese data even put pressure on investor sentiment in Europe this morning with the Euro dropping close to a one month low breaching the $1.06 level for the first time since mid-March. The euro has come back under selling pressure as the ECB continues its bond buying program pumping freshly minted euros into the markets and forcing the value of the common currency lower.

The pound sterling hit a five year low on the combination of lower than expected UK industrial output data and election concerns. British citizens will be heading to the polls on May 7th to elect a new government. Elections typically weigh on a country’s currency as investors absolutely detest uncertainty and the UK elections are apparently going to be down to the wire. British leaders face the challenge of ‘twin deficits’ (similar to our own here in the US) and investors are concerned that a ‘weak’ coalition government may not be able to properly navigate the country through the necessary policy moves. There is also a possibility that Conservatives will bring another promised referendum on whether Britain should stay in the European Union or leave – which would definitely put pressure on both the pound and the euro if/when this occurs.

With the dollar pushing higher, precious metals continued to fall. Gold is down about $5 this morning but looks to be consolidating right around the $1,200 figure after dropping from a $1,220 level last week. The timing of the next Fed rate hike and stronger dollar are both contributing to selling pressures on gold. The slowdown in China is also adding to pressure on the shiny metal as Chinese investors are one of the largest buyers of the physical metal and any slowdown in China increases the possibility that Chinese investors will slow their precious metals accumulation. Silver and Platinum were also trading off this morning while Palladium is up just slightly.

Currencies today 4/13/15. American Style: A$ .7570, kiwi .7429, C$ .7925, euro 1.0553, sterling 1.4638, Swiss $ 1.0181. European Style: rand 12.1465, krone 8.1002, SEK 8.8379, forint 280.90, zloty 3.8014, koruna 25.925, RUB 52.525, yen 120.10, sing 1.3728, HKD 7.75, INR 62.3532, China 6.1395, pesos 15.267, BRL 3.0989, Dollar Index 99.74, Oil $47.92, 10-year 1.89%, Silver $16.99, Platinum $1,144.50, Palladium $769.98, and Gold. $1,193.10

The rain has paused already and I can actually see blue skies peeking through the clouds. I guess the opening day celebrations which begin in a few short hours downtown won’t be a washout after all. Congrats to the St Louis Blues who won their final regular season game of the year on Saturday. The team they faced, the Minnesota Wild, will end up staying through the week as they are the Blues first round playoff opponent. I have been a LONG time Blues fan, and always get my hopes up going into the playoffs only to have them ripped away. But this year certainly feels different – and hopefully we will finally get to bring the Cup to St. Louis! I hope everyone has a Marvelous Monday and thanks for reading the Pfennig. Go Cards and Go Blues!!

Chris Gaffney, CFA
EverBank World Markets