Fed Leaves Rates Unchanged, But Sounds Hawkish…

November 2, 2017

* 3rd Consecutive day of little movement in the currencies
* Eurozone PMI prints strong again!
* Palladium knocks on the $1,000 door!

Good Day… And a Tub Thumpin’ Thursday to you! As usual, you’ll have to pick up the slack from me having an infusion today, for Tub Thumpin’! Congratulations to the Houston Astros, who beat the Dodgers in Game 7 of the World Series last night… I tried to stay awake for the end, but just couldn’t, as the game dragged on with all the pitching changes. I was glad to see that nothing happened after I went to bed! Head East greets me this morning with their song: Never Been Any Reason… My good friend, Duane and me have breakfast now and then at the Olivette diner, where the picture of Head East members sitting at the counter was taken many years ago…

Can you say, three days in a row? I knew you could! HA! But that’s what we had yesterday, a third consecutive day of little or no movement to speak of in the currencies… the early morning gains in Gold couldn’t be held onto by the shiny metal, and the price of Oil slipped for the first day in a week. The Dollar Index moved 2 ticks in the past 24 hours, and there you have it. I’ll Talk to you Monday… Just kidding… I can write for hours about things on my mind, if that were the charge…

The Fed left rates unchanged as suspected they would, but changed one word in their statement that got the markets all riled up… The Fed decided to change their outlook for growth from “moderate” to “strong”… Makes sense given the fact that Fed Chair, Janet Yellen has used the phrase “strong and robust” to describe the economy in the past. The Fed had two other points for us… “Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize”, and : “Near-term risks to the economic outlook appear roughly balanced”

The Fed sure sounds like a Central Bank that’s hell bent and whiskey bound to hike rates at their next meeting in December… But something about that just doesn’t feel right to me, and I’ve said it for several months now that the Fed is finished hiking rates in this cycle… Two years ago all points were directed at a Fed rate hike in December, and I held my ground on no rate hike, and had to wipe the egg off my face after the Fed hiked rates for the first time in a decade… I sure don’t want to have to go through that again, and I truly don’t believe I’ll have to!

It’s a real problem that’s going on with the Petrol Currencies of Norway, Russia, Brazil, Canada, and few others. I told you yesterday, that the Petrol Currencies hadn’t been able to rally with the rise in the price of Oil… But boy did they sure get sliced when the price of Oil slid lower yesterday… The slicing was done thinly, so the losses to the Petrol Currencies was not much to speak of, but it was a loss nonetheless.

Have you been tracking the price of Palladium in the past week? Letting Gold get all the headlines, Palladium has moved, stealth like, up the $900 handle with ease, and is knocking on the door of $1,000 this morning. Remember last month when Palladium passed Platinum in price, and reached levels it hadn’t seen in 16 years, only to have the rug pulled out from under it, by “the boys in the band”? It takes about 100 days of production of the this metal to meet the short positions that have been taken in the metal… I’m just saying… But will they leave Palladium alone to rally this time? I doubt it…

Boy, you sure sound negative this morning Chuck! Sorry, I’ll try to do better.. This morning, Eurozone PMI printed for Rocktober. For all of you new to class, the PMI is a Manufacturing Index that has a line of demarcation between expansion and contraction at and index number of 50… PMI actually stands for Purchasing Manager’s Index… Well, the Eurozone’s Rocktober PMI remained strong at 58.5, the same figure that printed for September. But the euro can’t seem to find a bid to move higher this week, even with a strong economic print like this!

Today is the day the U.S. Tax Reform bill is supposed to be made public, which means the clock is ticking for a passage of the bill before the lawmakers leave for their Thanksgiving break. That’s less than 10 days as I see it, and given the battles that go on in Congress, I just don’t see it happening… And the longer it goes on without any resolution and vote, the pressure will begin to build against the dollar…

This is why I believe we’re seeing the no or little movement in the currencies each day… Traders don’t want to make a call on the direction of the dollar, until this Tax Reform thing gets settled… And we also have the nomination of a new Fed Chairman that’s supposed to be done before the President heads to Asia next week. Will it be Jerome Powell, or Kevin Warsh? Either one is a dove, and will keep rates low.. it sounds like it will be Powell, and it will be announced today…

So, that’s one of the things that was helping the dollar along that will be out of the way… The saber rattling with N. Korea has been put on the back burner for now, and as I see it, the dollar should be getting back to the underlying weak trend soon..

The Swiss franc is at parity with the dollar this morning, trading at 1.00… This move in francs has nothing to do with things in Switzerland… It’s all about the cross with the euro, and with the euro weaker, the franc gets stronger, and then that carries over to the franc / dollar cross… The Swiss National Bank (SNB) has stated over and over again that they want a weaker franc… Negative deposit rates, haven’t done the trick for the SNB… If that’s the case then forget about a weaker franc and embrace a stronger franc with positive deposit rates!

I’ve not been a fan of the SNB since they put that floor on the euro/ franc cross years ago, and then removed it to everyone’s surprise (except the wife of the SNB president! HA!) a few years later… The SNB has tried everything under the sun, moon and stars to weaken the franc, and that immediately gets you put on Chuck’s list… Which is someplace you don’t want to be!

As I said above Gold wasn’t able to hold on to its early morning gains of $9.40 yesterday morning… the “boys in the band” were working hard and saw to it that 363,000 contracts were traded in Gold yesterday… That’s right I said 363,000 contracts…. That’s crazy folks! The price of Gold flip-flopped a couple of times yesterday, as the short sellers would bring it down every time the shiny metal would mount a rally… Gold did end the day on a positive note, but up only $3.90 to close at $1,274.30 on the day.

The U.S. Data Cupboard has the stupid Productivity report for Rocktober this morning, along with the Unit Labor Costs… These are interesting data prints but not market moving, even though the Fed members have been making a BIG Deal about the lack of productivity… Yesterday’s Data Cupboard has the ADP Employment Report for Rocktober, and it showed that 235,000 jobs were created in Rocktober.. WOW! The ADP report is more reliable than the BLS report which will print tomorrow…

I of course will be resting and not looking at the markets at all tomorrow morning…

To recap… Another day of little or no movements in the currencies… Gold couldn’t hold its early morning gains but ended the day up nearly $4, and the price of Oil slipped. Eurozone PMI was strong for Rocktober, but wasn’t able to give the euro the traction it needs to move higher. The Swiss franc is at parity to the dollar this morning, and it’s all about the euro/ franc cross, nothing that the SNB has done.

For What It’s Worth… You’ve got to love it when a plan comes together right? Well, the plan in Russia was to make doing business easier, and they have done just that! This is where you can find the article:http://russiafeed.com/russia-soars-global-ease-business-rankings/

Or, Here’s Your Snippet: ” Russia has jumped five spots to 35th in the World Bank’s annual Doing Business Report that evaluates the ease of doing business in a country.

The Doing Business survey ranks 190 national economies based on 11 areas of business regulation. Russia’s new ranking places it ahead of many Western countries such as Belgium and Italy, and just behind Japan.

Last year, Russia ranked 40th based on categories evaluating the ease of starting a business, registering property, getting loans, paying taxes, and enforcing contracts.

Russia has steadily risen in the overall “Doing Business” rankings over the years. After the country had ranked 120th in 2011, President Vladimir Putin signed a “100 steps” decree the following year with the goal to reach 20th place by 2018.”

Chuck again…. WOW! Now that’s the way to set a goal and then go about achieving or meeting that goal!

Currencies today 11/2/2017… American Style: A$ .7706, kiwi .6916, C$ .7787, euro 1.1638, sterling 1.3250, Swiss $1.00, … European Style: rand 13.98, krone 8.1437, SEK 8.3915, forint 266.85, zloty 3.6390, koruna 21.96, RUB 58.19, yen 114.05, sing 1.3603, HKD 7.8014, INR 64.66, China 6.6136, peso 19.05, BRL 3.2690, Dollar Index 94.66, Oil $54.24, 10-year 2.37%, Silver $17.10, Platinum $931.15, Palladium $995.75, and Gold…. $1,277.10…

That’s it for today, and this week, as today is an infusion day, and tomorrow is Infusion Confusion… I had a great lunch yesterday with some friends from high school, and with a 3 month old baby girl, named Poppy.. One of my friends was on grandma duty so she brought the baby to the lunch, and we all loved it! I was happy with the Astros winning the World Series, good thing for Houston. My two sisters live near Houston, so I’m sure they were excited! Next week I’ll be writing to you from S. Florida… And I’m sure to be in a better mood each day! Depeche Mode takes us to the finish line today with their song: Personal Jesus… And with that, it’s time for me to reach out and touch faith, and send you on your way to a Tub Thumpin’ Thursday! Be Good To Yourself!

Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts


Chuck Butler recently joined the Aden Research Group, a research center led by writers and market analysts Pamela and Mary Anne Aden. The Aden Research Group publishes three newsletters:
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