Fairly Soon.

* The dollar is softer again, this morning..
* FOMC minutes disappoint the markets
* Brazil Cuts Selic Rate 75 Basis Points!
* Pesos & rand rally past psychological levels.. ..

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

Good Day. And a Tub Thumpin’ Thursday to you! Well, here I am, and I’ve been staring at the blank screen to write the Pfennig on, for about 1/2 – Hour, now.. I either can’t get my brain to start working, or there’s nothing to write about. Unfortunately, I believe it’s a combination of both, this morning.. UGH! Uriah Heep greets me this morning with their song: Easy Livin’ . Back in the early 70’s, Uriah Heep had a live album that I had on 8-Track, and it got played so many times as I drove from Del City Oklahoma, to St. Louis and back..

Nothing like my rock-n-roll memories to get my engine started today, eh? Well, the dollar is softer again this morning, but quite frankly speaking, the move is nascent at best.. Yesterday morning the Dollar Index was 101.63, and this morning it is 101.28.. The dollar was getting sold at brisk pace yesterday afternoon, but profit taking stepped in overnight, and left us with a soft dollar, but not by much.

The Data Cupboard yesterday was key master of currency movement. The Data Cupboard had the FOMC Meeting Minutes, which disappointed the markets by not containing any clues about a rate hike next month.. there just wasn’t anything to take from the minutes that we haven’t already heard from Janet Yellen or any of the fed speakers that have been out on the speaking circuit. So, no new developments to consider, the markets took their tablets, smart phones, or whatever tool they used to trade with these days (what ever happened to hand signals?) and went home. They didn’t go away mad, they just went away.. And the dollar got sold. not by a large margin, but the euro recovered a bit, and the Aussie dollar (A$) traded over 77-cents!

One phrase that kept coming up was “Fairly Soon”, with regards to when the Fed members see the need to remove accommodation (hike rates).. The band Yes, had a great song titled: Soon.. Soon, oh soon the light.. Pass away and soothe this endless night.. Great stuff, but Chuck, you need to get back to the Fed.. Oh, that’s right, so once again the Fed has thrown us a phrase that is so “non-committal” and just left it there for the markets to figure out.. This all started with what I used to call “Greenspeak”, when Big Al Greenspan was the Fed Chairman, and he would use a word or a phrase, that would leave the markets scratching their collective heads, wondering what he meant by that.

Well, “Fairly Soon” to me means next month.. So, let’s just go with that, OK? I’ve said all along that the Fed would hike rates in March, and I’m sticking to that thought! But the bond boys and girls are buying that rate hike talk, as the yield on the 10-year Treasury remains around 2.40% and 2.45%, today it’s 2.41%.. And apparently, the dollar bugs aren’t convinced either, otherwise they would be coming out the wall boards by the millions to run around and drive everyone crazy! Hey! They (the dollar bugs) call us Gold Bugs, so I just reversed the tables on them!

I did see a comment in the FOMC Meeting Minutes, that addressed the strong dollar. there was a sentence in the minutes that said, “Fed Officials saw downside risks from further dollar strength.” Well, at least someone or some members see what this strong dollar is capable of doing to the economy.. There’s a fair price for a currency on Purchasing Power Parity (PPP) and then there’s an overpriced currency that’s too strong, and that’s what we have with the dollar right now.. But currencies aren’t any different than any other thing in life. You have something that’s out of whack, and so it decided that it needs to correct, but the correction goes way past the middle to overdone. You can apply that scenario to just about everything in life.. Nothing ever stops in the middle, to the Goldilocks level, no it has to keep going. whether the item is going one way or the other.

So, I mentioned above that the A$ rose to trade over 77-cents yesterday evening, and then said that profit taking stepped in.. Well, that’s true, but there was something else causing the profit taking to exist.. Aussie CAPEX (capital expenditures), which I’ve told you is so important to a growing economy, took a step backward in the 4th QTR, falling -2.1% which was worse than expected (-0.5%). This marks the eighth fall in the last 9 quarters. So, Australia is not ready for prime time folks.. And the A$ should have seen some selling based on this key fundamental being so weak! But I find this to be curious, in that if I recall correctly, in the 4th QTR, business sentiment was strong in reports that printed. So, how can sentiment be strong, but the actual buying of equipment, etc. was weak? Riddle me that one Batman!

The Brazilian Central Bank (BCB) did cut their Selic Rate 75 Basis Points last night, like I said they would.. and the kept the door open for another 75 Basis Points (maybe more as I said yesterday too) for their April meeting. And like the January rate cut, the real didn’t react unfavorably toward the rate cut, like currencies used to when a Central Bank debased their currency! But with inflation in Brazil dropping to less than 5%, the “real interest rate” in Brazil remains quite high.. right now the “real interest rate” which is the internal rate minus the inflation rate, is 7.75%, and that’s probably what’s keeping the heat off the real.

Well, most of Asia, led by Japan, can’t find the scent of inflation, but Singapore has a good sniffing dog, and has picked up the scent of inflation without a problem! Year on year CPI rose 0.6% headline and 1.5% core (without food and energy).. The consensus for CPI was 0.6%, so inflation growth in Singapore was bang on expectations. Like I said a week ago, this will allow the Monetary Authority of Singapore (MAS) to keep the band that the Sing dollar trades in, the same, which means the Sing dollar will be room to move higher if it needs to. And the Sing dollar rallied on this print..

And looky there! I guess the Mexican Central Bank’s fancy pants intervention that we talked about yesterday, is working, because the peso just fell below 20 for the first time in a month of Sundays! And as long as we’re talking about currencies that moved past a psychological figure. The S. African rand moved below 13 and trades with a 12 handle this morning.. The Tent Revival is still working its margin.

Gold puttered along yesterday with 188,000 contract traded but the buyers met up with the sellers and a the end of the day, Gold closed at 1,237.20, up only $1.80 on the day. I see Gold up a buck or two in the early morning trading that takes place before the NY traders come in, which normally changes everything the overnight markets have worked on. I’ve got something in the FWIW section today from the World Gold Council that should wake up a few traders, that is if they read it..

The other piece of data in yesterday’s Data Cupboard was the Existing Home Sales print for January.. And.. the Home Sales kicked rear and took names later! Hitting a 10-year high of 5.69 Million homes sold in January VS the expectation of 5.57 and a December print of 5.51 Million.. I told you yesterday that I thought this print would be strong given the warm winter that a lot of the U.S has been experiencing this year. But there was something about this print that had my Spider sense tingling, what could it be, what could it be? And then I went to read the 5 Minute Forecast (www.agorafinancial.com ) and they had a couple of headlines that I want to list for you here.
1. “we face a new housing crisis
2. The pace of existing home sales has just reached a 10-year high
3. The sales pace last month was the highest since February 2007. That happens to be the month the first tremors began to shake the mortgage market.
4. Today we’ve got a very different crisis”..

Ok, you’ve got me, what is this very different crisis? Well, Agora’s Zach Scheidt said all these things maybe he has an idea about this “very different crisis”? Let’s listen in to Zach talk about it.. “There are too many buyers on the market and not enough homes for sale. It’s not just existing home supply that’s tight; so is new construction. Today we are back to less than five months of housing supply, and it’s the smallest amount in 50 years.”

I find this interesting, don’t you?

To recap. the Fed disappointed the markets with the price of their meeting minutes last night. And the currencies rallied, but that rally was brought back a bit in the overnight markets. So, we start the day with the dollar softer than yesterday and the day before! I don’t get why the dollar is selling off with a rate hike in March, just about all tied up in nicely done bow,

For What It’s Worth. Ok, I subscribe to the World Gold Council (WGC ) and every now and then, they print something that interests me, and in January their front page had former Fed Chairman Big Al Greenspan talking about Gold & Silver! I think as a non-subscriber you can still look at the website, which is : www.gold.org/research/gold-investor

Or, here’s your snippet: Significant increases in inflation will ultimately increase the price of gold. Investment in gold now is insurance. It’s not for short-term gain, but for long-term protection.

I view gold as the primary global currency. It is the only currency, along with silver, that does not require a counterparty signature. Gold, however, has always been far more valuable per ounce than silver. No one refuses gold as payment to discharge an obligation. Credit instruments and fiat currency depend on the credit worthiness of a counterparty. Gold, along with silver, is one of the only currencies that has an intrinsic value. It has always been that way. No one questions its value, and it has always been a valuable commodity, first coined in Asia Minor in 600 BC. ” = Alan Greenspan

Chuck again.. I was hit for a loop reading this article. You see Big Al was a Gold Bug, educated by the great Ayn Rand, but when he became the Fed Chairman, he left his Gold Bug membership at the door, and didn’t mention Gold or Silver until he had left the Fed some 18 years later.. But I’ve heard him talk about Gold and now Silver, which he never used to talk about in the same sentence as Gold, but did at least 3 times in this article, quite a few times now, to state that he has gained his membership back to the Gold Bugs..

Currencies today 2/23/17. American Style: A$ .7690, kiwi .72, C$.7605, euro 1.0550, sterling 1.2465, Swiss $ .9899, . European Style: rand 12.9449, krone 8.36, SEK 8.9111, forint 292.05, zloty 4. 0899, koruna 25.6277, RUB 57.67, yen 113.18, sing 1.4130, HKD 7.7594, INR 66.78, China 6.8788, peso 19.89, BRL 3.0868, Dollar Index 101.28, Oil $53.36, 10yr 2.41%, Silver $18.05, Platinum $997.28, Palladium $768.35, Gold $1,238. 20 and SGE Gold. $1,247.56

That’s it for today. Man.. I almost fell out of my chair, as I almost nodded off! It’s weird, I wake up and can’t go back to sleep, but after I’m headed back to bed once his is out of here! Well, I was wrong yesterday when I talked about National Margarita Day, It was yesterday. And in honor of National Margarita Day, I actually had my very first Margarita, ever! I didn’t care for it much, so now I don’t have to wonder if I want one or not. Happy Birthday to Christy Hill today! It’s your birthday, Christy, have a grand day! 2 more days until the first spring training game.. There are Cardinals spring training games at Roger Dean Stadium (less than 5 miles from here) on Saturday and Sunday, and I’m certain that on Monday morning, Kathy will tell me she doesn’t need to go to any more games.. HA! My beloved Missouri Tigers lost another game Tuesday night, this time to MIGHTY Kentucky, but they game the Wildcats all they could handle, and they have played a bit better in the 2nd half of the season, so maybe, just maybe, they will win more than 7 games next year! Steely Dan takes us to the finish line today with heir song FM.. Let’s go make this a Tub Thumpin’ Thursday, OK? And remember to Be Goo To Yourself!

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