French Elections Send The Euro Soaring!

In This Issue.

* Euro and “euro-lites” rally.
* Rubles and real get sold.
* Lots of GDP reports this week.
* Oil barely hold on to $50.

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

Good Day. And a Marvelous Monday to you! It was a busy weekend, it’ll be a busy week, and I’m here to talk about all of it! The French election results, tax reform, Q1 GDP, and several Central Bank meetings this week, and we can’t forget that the Blues move on to the 2nd round of the playoffs!. That’s on the docket for today, so get your coffee and let’s go! Bad Company greets me this morning with their song: Movin’ On.

Front and Center this morning, the French elections gave the markets a sigh of relief, as the Centrist, Macron, went on to the 2nd round to face the anti-euro candidate, Le Pen. the next vote is May 7th, and the Centrist, Macron, has a 20pt lead in the polls, so if that can hold through the voting, we wouldn’t have a case of upsetting the applecart, and would instead remain steady Eddie in France. Yesterday’s voting made the euro traders very happy, and the euro has gapped up to 1.0870, and has taken every currency that is a “euro-lite” with it, like the Hungarian forint, Czech koruna, and Polish zloty. The rest of the currencies aren’t faring so good against the dollar this morning. They’re just stuck in the mud. Except that is the Petrol Currencies. UGH!

This is one of those days when just looking at the Dollar Index, you would think that the dollar is down for the count, as the Index is 98.95 this morning, down from Friday’s 99.76. But the drop in the Index is all about the euro, because Japanese yen is not helping, and the other currencies in the Index have too small of a weighting to cause movement in the Index.

And the yield on the 10-year U.S. Treasury has bumped higher to 2.30%… But unless the U.S. works out a budget this week, we could very well see this yield drop again by week’s end. More on the budget mess below.

So, a lot of the “risks” that were associated with the French election have been put on the back burner this morning, and that has crushed Gold in the early morning trading. The shiny metal is down nearly $16 in early trading, due to the removal of the “risks” of the French election. More on Gold later.

And in a roundabout way, the Swedish krona rallied on the French election. Why would that be? I hear you asking. Well Sweden’s Riksbank is rumored to be ready to announce an end to their negative rates, and bond buying, which they wouldn’t be able to do if the euro was under pressure from a different outcome of the French election. So, we have a krona rally going on today!

The other BIG News this morning is that the price of Oil is barely hanging on to the $50 handle. It’s needless to say the Petrol Currencies are getting sold, but there! I said it anyway! HA! It’s all about supply accumulation, folks. And demand is down too. The summer driving season isn’t here yet, and I have to wonder with the “age of extravagance” that I talked briefly about on Friday, just how many families pile into the family auto and go on a road trip anymore. That takes me back to when I was a kid. We usually spent our dad’s summer vacation, camping. But one year, when I was just about 12 or 13, my dad had bought a brand, spanking new, Ford Country Squire station wagon, and we all piled in for a trip to Texas! That was HUGE for the Butler kids, for we had never been out of the state of Missouri!

OK. I digress, and I apologize for that, but longtime readers know that my mind gets cast into those time passages every now and then.

So, the Russian ruble, and Brazilian real are taking the brunt of the selling of the Petrol Currencies. The good news for the euro, has softened the selling of the Norwegian krone, and in fact the krone has carved out a gain VS the dollar this morning, and the Canadian dollar/ loonie is still trading with a 74-cent handle, so it looks as though the ruble and real have to take their lickings today without their brothers in arms.

Getting back to the euro. The European Central Bank (ECB) will meet this week (Thursday), and ECB President, Mario Draghi, has the opposite problem that the Fed’s Janet Yellen had last month. Recall that after the Fed meeting, the markets took what Janet Yellen had to say as “dovish”, and then she and her Fed mates, spent the rest of the month attempting to correct the markets. Well, Draghi, on the other hand, left the market thinking that we was being “hawkish” after the ECB’s last meeting, and so, I think he’ll spend an inordinate amount of time at this meeting, attempting to get the markets thinking along with him again. Now, that’s just my take on this, and I could be wrong, which I hope I am, because that would mean the ECB is thinking of ending their negative rates, bond buying experiment! Anyway, if the actions play out the way I’ve described them , then the euro would probably see some selling on Thursday. But that’s 3 days from today, so let’s not worry about it now, and cross that bridge when we get there!

Well, it’s GDP week, as if GDP were a poker hand held by each country and they have to show their cards this week!.. The U.S., U.K., Canada, and Eurozone are all in the poker game, and will have to show their cards this week. The biggest risk is the U.S., as I expect GDP to remain pretty steady if not bumping higher in the U.K., Canada and Eurozone, but dropping like a rock in the U.S. Recall that the first and second revisions of Q1 GDP left it at 2.1%? Well, how does a final reading of less than 1% sound? About right if you ask me! Of course the spin doctors are already preparing their responses to this drop in 1st QTR GDP, and they’re already talking about how the 2nd QTR will rebound. Well, I’m from Missouri, they’re going to have to show me that rebound before I believe it!

In Australia tonight, they will print their 1st QTR CPI. Recall that last week, New Zealand’s 1st QTR CPI jumped from 1.3% to 2.2%? Well, I expect the same type of jump in consumer inflation (CPI) for Australia. Their previous quarter CPI was 1.5%, and I expect CPI to jump to 2.2%.. But it won’t be enough to push the Reserve Bank of Australia (RBA) to move their bias to a tightening bias, but it will get the currency traders all lathered up, and IF CPI does jump like I think it will, we could very well see the A$ stronger tomorrow morning.

Gold actually closed higher on Friday by a measly $2.20 to end the day at $1,283.90, but like I said above, the French election has caused the shiny metal to get taken to the woodshed and is down nearly $17 in early morning trading today. Gold had another whopping day of contracts traded on Friday of 217,000 (Thanks Ed Steer!) While the French election results were good for the euro and “euro-lites”, it sure didn’t do Gold any favors.

I found this quote on Ed Steer’s letter this morning, and loved it! You can find it here: (but you’ll need to subscribe) and here’s the quote: “In the absence of a credible monetary standard, we expect no escape from the treadmill of rising debt, both US and globally, that outpaces economic growth. Income inequality, wage stagnation, overvaluation of financial assets, and speculation instead of productive investment are likely to be prolonged under the current monetary regime. Whether or not policy makers take a proactive approach to address monetary reform, the fact remains that gold is massively underpriced in all paper currencies. It would be preferable if the necessary adjustments could occur without a repeat of a 2008-like financial crisis. We give this possibility a chance, albeit slim. In any event, we expect a significant repricing of gold higher during the current administration, either by design or because of market events. Whenever a repricing happens, we expect broad grassroots support for that outcome.” – John Hathaway, Tocqueville Funds

Well, I completely forgot to sing the Taxman song on tax day last week, as Pfennig Tradition had done so for so many years. I think I was still in shock from the checks I wrote to the Gov’t and the St. of Missouri. UGH! But, it is what it is. unfortunately for my retirement funds! HA! Well, we had a nice write up on Taxes in the Sunday Pfennig yesterday, if you missed it, you can still read it here: And they sung the Taxman song! I’m going to dive a little deeper with taxes this morning, because well, they’re on my mind.

I was interested to read in the Pfennig yesterday that individuals are now responsible for 52% of the tax receipts the Gov’t received. And Corporations are lagging. Is that right? Instead of going for the throat of investors who book a profit on stock, shouldn’t the Gov’t be going for the throat of Corporations who would be able to fund huge amounts of tax receipts? Well, I digress there, because I hadn’t intended on going down that rabbit hole. Instead I wanted to point out that yesterday, April 23, was national Tax Freedom Day. You know the day that Americans have worked enough to cover their tax burden. Of course it’s a different day depending on where you live. For instance, here in Missouri, TFD (tax freedom day) was April 13th. But if you live in, say. California you won’t see TFD until May 1st. And taking the blue ribbon for the latest TFD is the State of New York, where they won’t see TFD until May 11th! Massachusetts comes in second with a TFD of May 5th. And winning the price for the earliest TFD is. drum roll please. Mississippi with a TFD of April 5th!

In the year 2525. No wait! In the year 1900, the TFD was January, 22nd. Now, that’s what I’m talking about! Less tax burden on individuals! And while I would like to see Corporations take more of the responsibility, wouldn’t it be nice if the deficit spending were to stop, and therefore the taxes needed to fund the gov’t were reduced? Ahhh, up on a hill, with a huge shade tree, and tall grass, where you can relax and dream. that’s where you need to be if you think Gov’t spending is going to be reduced!

OK, that’s enough talk on taxes and Gov’t spending today. My bursitis seems to flare up when I start talking about Gov’t spending, and it happens on the Butler patio too! But, I would not be a very good journalist if I completely left out the fact that the Gov’t Budge showdown is this week. If we don’t have a new budget by Saturday, the Gov’t will have to shut down. Here’s the sticking point of the budget. President Trump has demanded that there be money for a border wall. It remains to be seen if there will be money allocated to a border wall or not, but in the end, it doesn’t matter if no budget is presented to be signed by Saturday. The Markets have dealt with the U.S. Gov’t shut down before, with the last one coming in 2013. Remember that one lasted 2 weeks? But I don’t see it as anything that could be a good thing for the dollar. But could be good for Gold.

The U.S. Data Cupboard is pretty empty today, and we don’t get any “real data” until Thursday when Durable and Capital Goods Orders will print, followed by the final print of Q1 GDP on Friday. So, we’ll just move along here today, for these are not the droids we’re looking for!

To recap. The French elections gave a sigh of relief to euro traders overnight as the final two to go on to the election are the final two the markets wanted to see. Macron VS Le Pen. And the candidate the markets want to see win (Macron) has a 20 point lead over the anti-euro candidate (Le Pen)! The euro and the “euro-lites” are enjoying the day, but Gold is not! With the risk removed, for now that is, in the Eurozone, Gold is getting sold by nearly $17 in the early morning trading today. Lots of Q1 GDP reports due this week, with the U.S. having the most risk, as Chuck believes U.S. 1st QTR GDP to have fallen to 1% or lower!

For What It’s Worth.. Well, there were quite a few candidates worthy of the FWIW this morning, but only one has that “feel good” quality that we all need on a Monday to get us going. So this was found on Bloomberg, and can be found here:

Or, here’s your snippet. “When Hiroe Tanaka’s father died, he left behind something that would change her life: a recipe for fried meat on a stick. It was an act of love. His daughter adored the Japanese street food known as kushikatsu, and he’d spent endless hours working out how to make it just right.

The handwritten memo, which detailed how to cook the seemingly simple dish, helped save a restaurant business from bankruptcy in 2008, elevated Tanaka from part-time employee to vice president of a company named after her, and made her a multimillionaire. The university dropout who once worked as an office lady now sets strategy for the $82 million Kushikatsu Tanaka Co.

The chain has come a long way since it opened its first restaurant in Tokyo in December 2008, where Tanaka and Keiji Nuki, the company president, used second-hand kitchen equipment to keep costs down. Kushikatsu Tanaka now has 146 branches across Japan and one in Hawaii. It plans to open 40 more this year. ”

Chuck again. Pretty cool, eh? I put my Big Green Egg to work yesterday for the first time this year, and I smoked some pork tenderloin, that had a handmade rub that I came up. I told Kathy that she was about to taste the most tender, juicy, flavorful tenderloin she ever tasted! Now, if I could only do that to make money! No, wait, I’m not 32 any longer, I don’t want to work that much!

Currencies today 4/24/17. American Style: A$ .7573, kiwi .7040, C$ .7440, euro 1.0870, sterling 1.2830, Swiss $.9942, . European Style: rand 12.9226, krone 8.5126, SEK 8.8112, forint 286.42, zloty 3.8945, koruna 24.6389, RUB 56.42, yen 110.12, sing 1.3921, HKD 7.7769, INR 64.41, China 6.8775, peso 18.51, BRL 3.1468, Dollar Index 98.95, Oil $50.08, 10yr 2.30%, Silver $17.88, Platinum $968.21, Palladium $802.14, Gold $1,273.40 and SGE Gold $1,287.37

That’s it for today. What an absolutely beautiful day here yesterday, after a couple of days of chilly, gray sky days, the sun came out, it warmed up, and I spend the day outside! First watching my beloved Cardinals win, and then cooking. I love being outside, especially in my backyard, or at my second home on the deck that overlooks the ocean. Well, how about those BLUES! On to the 2nd round of the playoffs to play Nashville! Friday night at my normal watering hole, my friends were giving me trouble for saying the hockey game was Friday night, when it was Saturday afternoon.. Oh well, as Jackson Browne sings: Don’t confront me with my failures, I have not forgotten them. This is the his last week of freedom. I’m taking about our metals guru, Tim Smith, who is getting married this coming Saturday. Boy this last year has gone fast hasn’t it, Tim? HA! The Beatles takes us to the finish line today with their song: Something. I used to play that one on my guitar too. but not any longer! UGH! Maybe when I retire and have more time? Maybe. And with that, it’s time to go. I hope you have a Marvelous Monday.. Be Good To Yourself!

Chuck Butler
Managing Director
EverBank Global Markets
Editor of A Pfennig For Your Thoughts