FOMC Meeting Minutes Show Fed Heads Turning Dovish…

A Pfennig For Your Thoughts

February 21, 2019

* Currencies can’t find a bid on Wednesday…
* Palladium sees major profit taking…

Good Day… And a Tub Thumpin’ Thursday to you! What a beautiful moon last night on the ocean! WOW! I sat out there in amazement at the beauty in our world, when you put all the other stuff on the back burner, and just concentrate on the beauty in our world. I had a great dinner with good friends at the oldest steakhouse in Florida… The Okeechobee Steakhouse… If you’re ever in this neck of the woods, you should try it! America greets me this morning with their song: Tin Man… Oh, Oz never did nothing for the Tin Man, that he didn’t already have…

Well, the march the currencies went on VS the dollar during Tuesday, didn’t continue on Wednesday, in light of the Fed sounding very dovish in their meeting minutes… I’ll get into the Fed’s meeting minutes in the FWIW section, so stay tuned for that! It made no sense to me that traders didn’t take the meeting minutes for what they were… and sell dollars… But… I can’t have everything…

The euro traded in a very tight range on Wednesday, and in the overnight markets it was much of the same. And what did I tell you yesterday about those BREXIT talks? That they weren’t going well, right? Late yesterday, it was reported that the pound was weakening on news that some negotiators have quit the BREXIT talks… Don’t ask me how I knew these talks weren’t going well, I just knew… had that 6th sense, if you will…

Palladium saw some profit taking yesterday, and closed down $15 and change on the day… I guess reaching $1,500 was just too juicy of a price to not take profits, eh? Oh, and a longtime commodities guy, sent me a note yesterday, and told me that Palladium had never reached $1,500… And asked me where I got my prices… Well, I get my prices on Bloomberg.com… And I don’t use futures prices, they are the “spot” prices for precious metal that I report each day.

I don’t try to paint pretty pictures for currencies and metals in the currency roundup, they are what Bloomberg says they are, and that’s that! And from the looks of trading so far this morning, Palladium is off another $24 in the early trading, so maybe the bloom is off the rose, here?

In Australia last night, some good labor reports, showed that 65,400 jobs were created in January, VS a negative 3,000 in December… So, a very nice rebound, eh? The Aussie Unemployment Rate remained at 5% in January, same as December. But with the euro being tightly traded in a narrow range yesterday, the Aussie dollar (A$) couldn’t find any terra firma to rally on these employment numbers… Hmmm….

What the hell was on Trader’s collective minds yesterday? The Fed sounds dovish, and talks about the idea that no new rate cuts will be needed in 2019, and the Australian Employment numbers are very good, and neither currency found a bid all day… What gives?

OK… I won’t get any answers here… So, I’ll have to wait to see if any of them (traders) are interviewed so I can hear their excuses…

The U.S. Data Cupboard has some old “delayed” economic prints for us today… First we’ll see Durable Goods Order for December… I’m sure that by now, the boys and girls that do these dirty deeds done cheap, have had plenty of time to massage the numbers, so I won’t be surprised to see them stronger that what we would expect, given the nature of other December prints… And Capital Good Orders for December will also print… We may see a negative number here, only because those same boys and girls that are going to massage the Durables, think that most people don’t know what CAPEX is… But you… Dear Pfennig Reader, know all too well, what CAPEX is… and if it does print negative, that’s a bad sign, and another brick in the wall…

Dirty deeds, done dirt cheap… (AC/DC) that’s the boys and girls that massage the numbers before allowing the world to see them…

The price of Oil jumped to a $57 handle in the past 24 hours… Supply and Demand, they are supposed to reveal price, right? Well, with the price of Oil, it sure seems to be in play, at least right now, as our friends (NOT!) at OPEC are apparently going through with their production cuts, thus reducing supply… And demand is still strong for fossil fuels, so there you go!

Just what U.S. consumers need right now, is a higher price for the gas they put in their monstrous SUVs… Or whatever Beemer, Audi or Benzie they drive! Down here I drive a Honda… And it takes regular gas, and they like to charge more for gas down here than in Missouri, so this bump up in price will only hurt me a little bit…

The U.S. Data Cupboard yesterday had a third tier data print that almost got past me… The U of Michigan does a confidence report, and they also do an inflation report, and their inflation report for January hit an all-time low! I sure hope the Fed Heads get this data in front of them… As I understand, from Danielle Di Martino Booth’s book, Fed Up, these Regional Fed Presidents get a lot of their data from the economists that they employ… So… let’s hope that somebody with an ounce a gray matter decides to put this data in front of his boss!

An old friend, not that he’s old, but our friendship is old, Steve Sjuggerud, is all over the internet these days with his latest call on stocks… Steve believes that the stock market bubble will pop, but before it does, he believes stocks are going to hog wild on the upside (my words not his) And looking at stock performances it appears that he may be correct…

But the Bond Boys are having nothing to do with this stock market talk, as the yield of the 10 year Treasury remains around 2.65%, and apparently is well bid at that level… I have to admit that I tend to agree with the Bond guys…

To recap… The currencies rally of Tuesday, couldn’t be repeated on Wednesday, and they look pretty much like they’ll trade in the same clothes today too… The Fed’s Meeting Minutes were quite interesting, in that they sounded pretty dovish, for a group of people that hiked rates at the same meeting in December… And Australia printed a strong Employment report, but none of these things could get the dollar bugs to give an inch on the day…

For What It’s Worth… Bloomberg had a good article on the Fed’s Meeting Minutes last night, and I pulled it so everyone could see what was on the Fed Head’s collective minds, back in December… Remember the FOMC hiked rates 25 Basis Point (1/4%) at that meeting but has since done the old two steps backward, and here are the 5 takes on what the Fed Heads had to say, and I found it on www.bloomberg.com

1. Or, here’s your snippet: “There was widespread agreement for the FOMC to end shrinkage of the $4 trillion balance sheet by the end of the year. The timetable ends uncertainty over whether shedding assets would further tighten financial conditions.
2. The FOMC essentially said it is throwing out the December forecasts for two rate hikes this year, and instead “many” on the committee were unsure whether any adjustments would be needed.
3. The committee is taking a patient approach in light of increasing downside risks, notably slowing global growth and turmoil in financial markets. Some FOMC participants were cutting their estimates for 2019 U.S. growth.
4. The Fed was becoming more dovish in its view on inflation, noting the outlook had become more muted compared to last year even though the U.S. labor market has been tightening.
5. U.S. stocks were mixed, while Treasuries edged lower after release of the minutes, indicating not a big surprise from investors.

Chuck again… Well, it’s all coming back to me now said the blind man as he spit into the wind… The Fed is turning dovish, and choking on their previous statement of how the economy was strong and robust! But traders didn’t see this as a reason to sell dollars? Strange, eh?

Currencies today 2/21/19 American Style: A$.7110, kiwi .6817, C$ .7580, euro 1.1345, sterling 1.3070, Swiss $1.0015, European Style: rand 13.9050, krone 8.6215, SEK 9.3468, forint 279.67, zloty 3.8190, koruna 22.6213, RUB 65.69, yen 110.75, sing 1.3525, HKD 7.8476, INR 71.11, China 6.7212, peso 19.21, BRL 3.7198, Dollar Index 96.54, Oil $57.34, 10-year 2.66%, Silver $15.86, Platinum $823.70, Palladium $1,438.10, and Gold… $1,338.40

That’s it for today, tomorrow, and next week! Yes, for all of you who have not paid attention this week, I’m going on my annual spring vacation starting tomorrow, and won’t be back in the saddle until 3/4… My first Spring Training Game is Sunday… Every year when I walk into the stadium and see the field for the first time, I get chills, and tear in my eye, because, if cancer had had its way with me, I would no longer be able to enjoy these trips to heaven on earth… Our Blues go for their 12th win in a row tonight in Dallas… Let’s Go Blues! Cardinals already reported a pitcher with arm problems… Every year, it’s something at spring training! I would go on about how this shouldn’t have happened to this pitcher, but you don’t want to hear that, so that’s all I’ll say about that! R.E.M. takes us to the finish line today with their song: Drive…. I hope you have a Tub Thumpin’ Thursday, and remember to Be Good To Yourself! bye~

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