Dollar regains lost ground.

* Slow day in data
* Currencies bounce back
* NOK takes top spot
* BOE meeting minutes

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

Good day. And welcome to Wednesday morning. As Chuck mentioned yesterday, he is away on vacation so the Pfennig is going to look a little different during his absence. In other words, you’ll be a getting a condensed version so it’s going to be a very quick read over the next couple of weeks and will be a joint effort of myself, Frank, and Chris. As will be tradition, let’s begin the day with our leadoff hitter, Frank Trotter:

“Wednesday, July 22nd, 2015 – Saint Louis, Missouri. As I wished Chuck goodbye Tuesday on his way to Florida for vacation he mentioned he would be glad to get out of the rain-rain-hot-cold-rain-rain cycle we’ve been having here in our little river city. What and go to where it’s just unbearably hot all the time I reminded him. HA. To each their best desire. In the pre-air conditioning days here in Saint Louis those who could would be found making the long drive to Michigan or Wisconsin or Minnesota, sometimes every weekend to cool off. Further back thousands would sleep in Forest Park each night. Cushy lives we have, yes?

That’s certainly something to remember when we complain about the flights being late, or a pothole on the freeway, or if the Internet is down for a few hours. Distractions to be sure but in the broader scheme of things it’s not really all that bad. Here in the US and in western Europe we’ve had the good fortune to be the leaders for a century or so. There are some competitive challenges out there and we are certainly seeing slower growth but the standard of living, on the whole, is pretty darn great.

So what is happening now that allows this to continue? Is the tinkering by the Fed/ECB and are the governmental policies in place allowing businesses to grow and provide jobs and income to a broad array of households? Fed Governors and the Chair seem to feel that the economy may be on track. At least one rate rise by the Fed is in all the comments made and the speeches delivered. If we believe, as many commentators do, that the 6 year advance in the market has been due to Fed stimulation what happens when rates go up? Does the minuscule measured inflation spike upwards then, and if so what do I do to hedge my bets? Or will it be smooth sailing over the next couple years? Lots of questions and two weeks to address them.”

Yesterday was a much different story than what we saw on Monday as there was widespread US dollar weakness against the currency and metals market, so it looks like the Monday selloff in most of those assets went a little too far. Before Chuck left the office yesterday, he left me with some thoughts to share that dives a little deeper:

“So. Yesterday, we saw a big rally in the euro, at one point in the day the single unit was trading with a better than 1-cent gain on the day. I went to the newswires to find out just what was behind this gain in the euro, when a couple of days ago, it looked as though the euro was going to hell in a hand-basket. So, what was it? Was it a strong piece of Eurozone data? No. Was it a weak piece of U.S. data? No. Ok, it had to be a speech by either a Eurozone member, or U.S. Fed member, right? No. Alright, what was it Mr. Know-it-all? What would you say if I told you I had no idea what it was? Now that would ruin your image of me as a Mr. Know-it-all, right? OK, then that’s not it! HA! Seriously, I think it was the lack of U.S. data that got things going for the euro, and then one buy begot another, and so on, until the single unit was up 1 full cent! Yes, a lack of data here in the U.S. for two consecutive days, had the dollar bugs retreating to the wall boards from which
they came.

I know, I know, you’re now asking. “How can a lack of data cause the dollar to stumble?” Well, since you asked, Mr. Know-it-all, I’ll tell you! Basically, it stopped the momentum. Remember in June and early July when weak data here in the U.S. would ruin the dollar bugs’ day? Well, the dollar bugs have become so focused on Janet Yellen’s promise to hike rates this year, that they have shrugged off weak data, but. two days of no data, had them wondering what the next data print had in store for them. And so, it was a sell the dollar, buy euros day.

And before you write a scathing email to the Pfennig Replies box, I wanted to point out that I’m just having some fun with the Mr. Know It All stuff. You see, Rocky the flying squirrel was one of my fave cartoons growing up. And in my best Rocky voice I say, and now a word from Mr. Know-It-All! Did you know that 50 Mr. Know-It-All segments were done? My fave one? How to take your covered wagon through the west – while being attacked by over 2000 savages. ( I guess there was no PC police back in the day!) So, I’m being facetious with the Mr. Know-It-All stuff, just having some fun. and now back to word from our sponsor!”

Thanks again, Chuck. As he touched on above, the only data that was on the docket yesterday were the revisions to Industrial Production and Capacity Utilization, which surprisingly yielded a slower trajectory than originally reported. At the end of the day, this really isn’t market moving data since much of it is very old and most likely no impact on the Fed’s decision as to when/if they will raise interest rates. Today will at least bring us something to evaluate with the June existing home sales and the May home price index, both of which are expected to show more gains.

With the dollar losing some ground yesterday, all of the major currencies were able to end the day in positive territory. The Norwegian krone finished in the top spot with both a stronger euro and a rise in oil prices doing all of the heavy lifting as the currency ended up with a 1.5% gain. The euro took second place with just over a 1% gain while the Danish krone and Swedish krona were close followers. I saw where S&P revised their sovereign credit outlook for Greece up to stable from negative, so that helped to underpin the European currencies. Ultimately, most of the currencies had gains of at least 0.50% so it was a day of recovery. The metals also had some modest gains as gold was hanging onto the $1,100 handle when I was walking out the door.

As I came in this morning, the dollar is marginally higher and as most currencies are sitting on slight losses before the US traders make their daily contributions. The only currency sitting on solid ground so far this morning is the pound sterling, after minutes of the last meeting indicate policy makers are trying to set the stage for higher rates. It was a unanimous decision to keep rates on hold earlier in the month but the Bank of England keeps the priming the pump for an eventual rate hike. Its not a good start to the day for metals as they have lost the gained ground from yesterday, and then some. I didn’t see any specific triggers in the news headlines that would explain the lower prices other than thoughts of higher rates, so sentiment continues to rule the roost.

Currencies today 7/22/15. American Style: A$ .7388, kiwi .6594, C$ .7698, euro 1.0915, sterling 1.5625, Swiss $1.0414, . European Style: rand 12.3602, krone 8.1571, SEK 8.5988, forint 282.48, zloty 3.7769, koruna 24.776, RUB 57.16, yen 123.78, sing 1.3646, HKD 7.7502, INR 63.63, China 6.1168, pesos 16.06, BRL 3.1916, Dollar Index 97.43, Oil $50.20, 10-year 2.33%, Silver $14.64, Platinum $958.25, Palladium $613.50, and Gold. $1,088.42

Mike Meyer
Vice President
EverBank World Markets