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Groundhog Day!

* Aussies print record Trade Surplus!.
* And that kicks the Asian currencies into rally mode!.
* BOE meets this morning, nothing expected.
* A Global Growth tent revival?

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

Good Day. And a Tub Thumpin’ Thursday to you! Yesterday, I plum forgot to welcome you to February, so Welcome to February, a day late and a dollar short! Man, my allergies are whooping it up this morning! They’re driving me crazy! Sort of like the economists that keep talking about “a cashless society”. I even heard one analyst / writer say that the Fed will introduce their own digital currency soon. WOW! Crazy stuff, eh? Me? I think that the “powers that be” will eventually attempt to get rid of cash here in the U.S. but, they’ll run into a roadblock I’m afraid. Sort of like the fish that runs into a wall, what’s he say? Dam! HAHAHAHAHA! Today is Groundhog Day! (that’s one of my all-time fave movies) And since I’m down south, I don’t care if Punxsutawney Phil sees his shadow or not! The Cure greets me this morning with their song: Pictures Of You.

Well, the currencies rally fizzled out yesterday as the day went along. The dollar didn’t really bounce back, but the knocking on the door of 1.08 by the euro ended, and the 76-cents door that A$’s were knocking on ended too.. Gold lost $3, but the price of Oil rebounded strongly up to $53.88 on the day. The Fed’s FOMC Meeting went off without any fireworks, and all eyes are now on the March meeting.

The Fed statement that came after the meeting was over, and the it basically said that the Fed members are comfortable with the labor market, but inflation is still not ready for prime time. Hmmm. I guess the Fed members are saying that they are comfortable that 95 million Americans that can work are not working. That the Labor Participation % continues to be at 1970’s levels? Oh well, that’s their definition of comfortable I guess. I differ, but then that’s just me. I’m not saying the Fed is wrong, I’m just saying that we are in disagreement with what comfortable should mean. And I don’t really count, so whatever the Fed says, is the way it is.

Well, the Aussie dollar (A$) failed to reach 76-cents yesterday, but. overnight, it not only reached it, but sailed past it, as Australia printed a record Surplus for the December report. That’s right! A record Surplus! For those of you keeping score at home, that was a Surplus of A$3.51 Billion VS a consensus outlook of A$2 Billion. So, exports led the charge of surplus number, and the best exports were raw materials and higher prices for those commodities/ raw materials. And that brings me right back to the point I tried to make in the current Review & Focus ( ) that there seems to be signs of a rebound in Global Growth, and this Aussie record Surplus goes a long way toward confirming that view. And don’t forget that I call the A$ the proxy for Global Growth, and the A$ has a better than 5% gain so far this year.. hmmm.. Makes you think, doesn’t it?

So, the Aussie Trade Surplus really kicked the Asian currencies onto the rally tracks, and Japanese yen saw a huge move stronger. And the Dollar Index dropped even further below 100.. I was looking through the currency roundup at moves made overnight, and we have some signature mores, like in the Polish zloty, that saw its price VS dollar move under the 4 handle for the first time in a month of Sundays. (zloty is a European priced currency, so the lower the figure the more value it returns in dollars, as it takes less of the currency to equal a dollar) The Hungarian forint is trading with a 285 handle this morning, a strong move for this currency overnight for sure. The Indian rupee has been quite stealth-like in its move to higher ground recently, and last night was no different. And in keeping with the Global Growth revival, the Brazilian real continues to defy gravity, and keeps booking gains long after the Olympics left town.

Speaking of the Global Growth revival. I’m going to order a Big Tent, and start the revival from inside the tent, and I’ll be calling to investors world-wide to come to the revival! That reminds me of my old presentations.. If you ever saw me speak at a conference, you’ll recall this. At the start of each presentation I would talk about myself a little, and then talk about the Pfennig, and then ask to see a show of hands of everyone in the audience that receives the Pfennig now. I would then say, OK for all you who didn’t raise your hands, why didn’t you? Well, you can rectify that lack of a Pfennig in your life by coming up here to the stage when I’m finished, I’ll place my hand over your head, and convert you to a Pfennig Reader right here! HA! Trust me, my presentations were never boring! I even had an audience of 750 people in Vancouver singing the song Lemon Tree along with me a few years ago! But like Puff the Magic Dragon. They ceased my mighty roar.

OK. sorry about that! Some things never change though. You get me going in one direction and I’m going to beat that direction to death before climbing out of the rabbit hole! So. Gold didn’t participate in the currency and Oil rally overnight.. Usually, you can watch the Dollar Index and get a good feeling about which direction Gold is going, and with the Dollar Index dropping further overnight, I would have thought that Gold would be looking perky today. I guess Gold traders got worn out on the $14 gain Gold made on Tuesday? HA!

The Russian ruble didn’t participate in the rally the Petrol Currencies put together with the climbing price of Oil.. I’m actually pretty surprised that rubles remained on the sidelines, especially since they had a nice GDP report. Here’s the skinny on that. Russian GDP for 2015 was -0.2%, which was far better than the forecast of -0.5%, and 2015’s -2.8%… So, it appears that Russia has weathered the storm and is set to show positive growth in 2017. I don’t want to spoil dinner with this, but in my upcoming Currency of the Month, where I highlight the Russian ruble, I talk about how it is widely thought that Russia would move out of negative growth to positive growth in 2017. So, we had the price of Oil rise, the Dollar Index drop, and the ruble sat on the sidelines. Hmmmm.

In the U.K. today, the Bank of England (BOE) is meeting as I write. I don’t expect the BOE to announce anything but a continuation of currency policy. We also heard that the U.K. Parliament voted to pass the Article 50 on the first vote.. There will be a few more, but the 498 to 114 vote to approve the draft, is quite strong, so I don’t expect this to change anything. The pound sterling continues to work its magic behind smoke and mirrors, but who’s to criticize? It’s rallying, and don’t’ look a gift horse in the mouth!

Yesterday, I told you about how Peter Navarro, the new head of the National Trade Commission made some disparaging remarks about Germany and the euro. Last week we had President Trump break new ground for presidents of countries by commenting about the dollar. Put those two shots across the bow of currencies, and one has to think that we could very well be seeing the beginning of a new currency war. For I don’t see the Administration changing horses in the middle of the stream here folks. This blasting other currencies for their weakness (in attempt to weaken the dollar, don’t forget about that piece of the puzzle) is going to continue in my opinion, which could be wrong.

I had a longtime reader send me a note yesterday, and ask me what I thought about Japan’s fundamentals. I replied that I’m still amazed that yen is considered a “safe haven currency” given their problems. which include but not limited to: 1. Debt up to their eyeballs.. Japan’s debt is more than twice the size of their GDP. 2. Demographics are just plain awful 3. They need structural reforms, like immigration, without it the economy will eventually dry up, due to not enough people to keep it going.

But here’s the thing with yen. I always tell you that the euro is the offset currency to the dollar, right? Well, yen isn’t far behind the euro, and so when the dollar is weakening, yen will rally based on it being one of the offsets to the dollar, which is getting sold to make it weak.

The U.S. Data Cupboard printed the January ISM (manufacturing index) yesterday, and it was pretty much bang on last month’s index number, having inched down to 55.4 from 55.5 the previous month. We’ll have to watch for further slippage here, like we had for most of last year. In addition, Construction Spending for December rose a paltry, 0.2%… And the ADP Employment Report showed a healthy job market for January with 246,000 jobs created. Hmmm..

There’s not much to choose from in today’s Data Cupboard, so just move along, these are not the droids we’re looking for..

To Recap. the currency rally yesterday fizzled out during the day, but woke up in the overnight markets, led by the Aussie dollar, which saw a record Trade Surplus report help to push the A$ higher. The report also woke up the Asian currencies, along with kiwi that climbed over 73-cents overnight. Gold lost some ground, not much, but some, and the price of Oil rebounded overnight. The Russian ruble is sitting on the sidelines for this Oil & currency rally. The BOE meets today, nothing new is expected here, and the currencies like zloty, forints, and rupees made positive significant moves overnight.

For What It’s Worth. I talked above about the disparaging words that Navarro had to say about Germany and the euro yesterday, and then I saw this and since it plays nicely in the sandbox with yesterday’s comments. It’s Ambrose Evans-Pritchard of the U.K. Telegraph, and I always stop to read his comments. I don’t always agree with him, but he makes me think, and that’s what this article is about. You can read it all here:

Or, here’s your snippet: “As a matter of strict objective fact, Donald Trump’s trade guru is correct. Germany is the planet’s ultimate currency manipulator.

The implicit Deutsche Mark is indeed “grossly undervalued” The warped mechanism of monetary union allows Germany to lock in a permanent ‘beggar-thy-neighbor’ trade advantage over Southern Europe, inflicting mass unemployment on the victim countries and blighting their futures.

Whatever you think of Peter Navarro’s trade philosophy, he is right that Germany’s chronic, huge, and illegal current account surplus – 8.8pc of GDP – saps global demand and seriously distorts the world economy.”

Chuck again. So, is this just ganging up on Germany, because they’ve figured it all out, and now everyone else is jealous? There certainly seems to be some of that here, don’t you think?

Currencies today 2/2/17. American Style: A$ .7672, kiwi .7310, C$ .77, euro 1.0815, sterling 1.2670, Swiss $1.0126, . European Style: rand 13.3755, krone 8.1865, SEK 8.7030, forint 285, zloty 3.9797, koruna 24.9811, RUB 60.16, yen 112.35, sing 1.4080, HKD 7.7592, INR 67.28, China 6.8875, peso 20.55, BRL 3.1369, Dollar Index 99.28, Oil $53.93, 10-year 2.46%, Silver $17.61, Platinum $1,001.60, Palladium $760, Gold $1,210.75, and SGE Gold that doesn’t change due to their holiday: $1,209.93

That’s it for today. I had to go to YouTube this morning a play Puff the Magic Dragon, once I mentioned it above, I had to hear it. And believe it or not, I don’t have that song on my iPod! What a sad song. I can relate to Puff. Oh well.. Our Blues fired the head coach. Hey! it wasn’t his fault that our goalies can’t stop the puck from going into the net! But the coach got fired. This move can either shake up the team and get them playing better, or the complete opposite of that. The investment group that is attempting to bring a MLS Soccer franchise to St. Louis, officially applied for a franchise yesterday.. St. Louis used to be thought of as the “soccer capital of the U.S.” , so it sure makes sense to me, that we have a professional soccer team! The Sun is rising outside. I like to take my coffee out to the deck and watch the sun come up over the ocean. But not Monday through Friday. I’m here writing at sunrise time! Ambrosia takes us to the finish line today with their
song: You’re The Only Woman. And with that, it’s time to send you out in the world to make this a Tub Thumpin’ Thursday! Be Good To Yourself!

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

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