If Currency Strategists Say Dollar Is Doomed, Why are They Buying Dollars Now?

A Pfennig For Your Thoughts

February 7, 2019

* Dollar buying continues
* Chuck sees a Global Recession on the horizon…

Good Day… and a tub Thumpin’ Thursday to you! I doubt I’ll do any Tub Thumpin’ today, as I’m still under the weather, and not sleeping much. But one never knows, I could have a miraculous recovery today! Yeah, that’s the ticket! The day after the SOTU brought more dollar buying yesterday, for reasons beyond me.. Buddy Miles greets me this morning with his song: Them Changes…

The dollar continues to recover from last week’s selloff, that came as a result of Fed Chairman Jerome Powell’s about face on rate hikes and balance sheet unwinding, and this week, all that has been forgotten, apparently… We have had some developments overseas in the overnight markets, but they pale in comparison to the about face by Powell, last week… So, in my humble opinion, this dollar buying is unwarranted, and based on the events of last week, the dollar buying should be dollar selling… Fickle traders…

OK… Front and Center on the overseas developments, saw the Reserve Bank of India (RBI) cut rates in a surprise move overnight… The Indian economy has been teetering for weeks now, and even though the rate cut was surprising, it was not unwanted…

In the Eurozone overnight, the European Commission cut their growth forecast after Industrial Production in Germany, the Eurozone’s largest economy, was weaker for a fourth consecutive month… The Commission believes that Global trade tensions and growing public debt are causing a slowdown in Germany, complicating the European Central Bank’s (ECB) plans for an interest rate hike this year. Yes, they believe that this slowing of the economy in Germany is going to put the kyboshes on the ECB’s plans to bring their monetary policy out of the stimulus business…

One can imagine that the euro isn’t performing very well, when you have statement like that coming out and filtering through traders’ collective minds… The Ausie dollar (A$) fell sharply on Wednesday after the Reserve Bank of Australia (RBA) opened the door to a possible rate cut as it acknowledged growing economic risks.

So, the news from outside of the U.S. is that of weakness… India cuts rates, the European Commission cuts their growth forecast, The RBA talks about weakness, and then add those things to the about face of the Fed last week on rate hikes, and what we have here folks, is a Global recession in the making…

I read on Reuters this morning that a recent poll of 70 currency strategists revealed that most of them believe the dollar will give back its gains of 2018 this year… Well, if that’s the case, why then are they buying dollars now? Fickle traders…

With a Global recession on the horizon, along with lower rates here in the U.S. what asset should be viewed as “worthy”? That’s right, if you guessed Gold, then you get a happy face sticker! The Central Banks around the world that have been buying Gold in recent years in preparation for this Global recession, are sitting pretty… And Central Banks that haven’t been buying Gold, well… they’re going to have some problems… At least that’s how I see it playing out, and in my opinion, I could be wrong… But I doubt it

Gold is up a couple of shekels this morning, after losing $8.60 yesterday… Gold held just above the $1,300 level basically because of the problems with Global Growth I just talked about, and let’s lose focus here… There’s going to be another Gov’t. Shutdown here in the U.S. soon… And when it does come, I’m of the opinion that a National Emergency will be proclaimed, and then the you know what hits the fan for the dollar, and Gold should be the benefactor…

I received an email from a dear reader a day or two ago, asking me about Silver, and was I as bullish on Silver as I am Gold? Well, of course I am! As I’ve said a few times in the past… When I talk about Gold, you can insert Silver there too, but Gold gets all the hype and headlines, so I don’t have to say Gold & Silver every time I talk about metals…

I don’t think I gave the thought of a Global Recession enough spotlight this morning, folks… This looks to be quite real, and the RBA talk is very important, as I’ve said for a long time now Australia is the proxy for Global Growth, and if the RBA is not talking of rate hikes, and instead choosing to talk about a slowing economy and the possible need of a rate cut, then Global Growth is off the table, folks… No Revival Tent goings on here, just country after country hunkering down, and heading for the storm cellar…

I’ve to quit writing today… I’m getting really pessimistic about what’s going on… So, let’s just head to the Big Finish and get this out the door!
To recap… The dollar buying continues, after a series of events overseas that has Chuck thinking that a Global Recession is in the cards. A majority of currency strategists believe the dollar is in trouble for 2019, but right now, they’re buying dollars… Fickle Traders… The RBI cuts rates overnight, and Gold lost $8.60 yesterday…

For What It’s Worth… Since I was talking about a Global Recession this morning, this article jumped out at me and said, “pick me, pick me!” And so I did… It’s about what’s going on with goods for sale… and it can be found here: https://www.zerohedge.com/news/2019-02-03/retail-apocalypse-isnt-over-its-actually-just-getting-started

Or, here’s your snippet: “Last year’s holiday sales season was one of the strongest in years. But unfortunately for America’s struggling retailers, many missed out on the sales bonanza as Amazon and other e-commerce platforms accrued nearly all of the sales growth while foot traffic at US malls was stagnant. Already, Kohl’s and Macy’s have helped crush the narrative of the strong consumer by slashing their earnings guidance, something that doesn’t bode well for Q4 GDP, thanks to what we warned would be an unsustainable inventory build up that has inflated growth numbers in recent quarters.

The retail space has already seen the first headline-grabbing retail bankruptcy of the year (see: Gymboree). And as Bloomberg warned in a story published this week, even after high-profile bankruptcies including Sears and Toys R’ Us, the “retail apocalypse” is far from over.

Though the Fed has capitulated to the whims of the market, retailers still make up about one-fifth of the universe of distresses borrowers. And on Friday, the head of the biggest mall owner in the US warned that more bankruptcies are coming this year. Economists are increasingly worried about a recession this year or next.

Simon Property Group CEO David Simon told investors on Friday during a conference call that there are chains that his company is “nervous” about. Anybody who has traveled to a US mall recently may have noticed this change: Where once there were shoppers, now they halls look disconcertingly empty.”

Chuck Again… And I was saying the other day, that we still haven’t seen Retail Sales for December… Is it something that the powers that be don’t want us to see?

Currencies today 2/7/19 American Style: A$.7101, kiwi .6752, C$ .7546, euro 1.1332, sterling 1.2905, Swiss $1.0023, European Style: rand 13.6190, krone 8.5862, SEK 9.2555, forint 281.81, zloty 3.7947, koruna 22.7705, RUB 65.70, yen 109.85, sing 1.3572, HKD 7.8455, INR 71.38, China 6.7431, peso 19.17, BRL 3.6843, Dollar Index 96.61, Oil $53.65, 10-year 2.67%, Silver $15.73, Platinum $805.34, Palladium $1,380.01, and Gold… $1,306.81

That’s it for today… And this week… I can’t begin to tell you how glad I am that today is Tub Thumpin’ Thursday! I’m so tired… I feel like Big Lee Smith used to look like when he came out of the bullpen! HA! I see a light at the end of the tunnel of our construction project… finally! In 1989, my house was built in 3 months! I’m just saying… The coffee is brewing, and I can smell the coffee (I’m just saying! HA!) Cat Stevens takes us to the finish line today with his song: Morning Has Broken… I guess a good morning song, eh? I hope you have a Tub Thumpin’ Thursday, and a Fantastico Friday tomorrow… And continue to Be Good To Yourself!

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