Is The Trade War On Or Off?

A Pfennig For Your Thoughts

May 14, 2018

* Currencies turn around the dollar rally
* SDR’s in the news…

Good day… And a Marvelous Monday to you! I know I mentioned it last week, but I sure hope all Mothers had a wonderful Mother’s Day yesterday… I celebrated it with Dawn and her family and Andrew and his family, which meant Dawn and Rachel were the honorees… Kathy is with her mom and sister, so I’m hoping they had a great Mother’s Day too! Whenever it gets to Mother’s Day, I get all teared up. I miss my mom, she was my biggest fan, no matter what I chose to do… My mind always goes back to those days when I was young, and playing in a band, and having band practice in my basement, and my mom would always come down stairs and sit and listen to us. That meant so much to me then, and still today. When I sliced open my bicep when I was 10, she told not worry, that she would take care of it. I miss her… Grand Funk Railroad greets me this morning with their song: Footstompin’ Music

Well, I didn’t mean to get sappy so early in the morning, but Rachel asked me yesterday my favorite memory of my mom.. .I tired to tell her the story I just told you, but couldn’t stop the tears from flowing in my eyes… So, let’s get to stuff that I can be more macho about! HA!

Well, the currencies had a comeback day on Friday, and have continued that rally in the overnight markets last night. The dollar began to get sold right after it was reported that we now have two consecutive months of disappointing jobs reports, and furthermore, hourly wages still can’t seem to get up off the canvas they were knocked to a decade ago, even though the Gov’t tells us the Unemployment Rate is 3.9%, which is a crock of well, it’s just not the truth… I go through all the details of how the Gov’t gets to that number incorrectly in this week’s Dow Theory Letters…

And I don’t want to get all in the face of the BLS, who reports the jobs numbers so early this morning, but… The BLS said the total jobs created in April was 164,000… The number of jobs the BLS added to the surveys though was 260,000! So, in reality, if we’re only counting real people, with real jobs, the actual report for the month of April was NEGATIVE!

The Bank of England (BOE) didn’t surprise anyone last week when they left rates unchanged, and BOE Gov. Mark Carney wasn’t as upbeat as he has been about a rate hike coming this time. I just don’t know what the markets are waiting for here… When Mark Carney was the Gov. of the Bank of Canada (BOC) he went for years saying that he was ready to remove accommodation, (read make a rate hike) and never did… Then he went to the BOE and started the same line of… Well, let’s just say, he hasn’t come through with a rate hike yet…

Regular readers of this letter know how I questioned the rally in sterling, with questions regarding BREXIT hanging over sterling like the Sword of Damocles, and when Carney began filling the markets with hope of a rate hike soon, I said… B.S.! It’s not going to happen, and it hasn’t!

Man, I was really blown away this past weekend when I received my latest letter from James Rickards… He of bold predictions and more… He seems to think that come July 1 2018, the dollar is going to get rocked BIG TIME, by an announcement from the IMF… Now I normally don’t get all that hyped up about these calls like this, but this time… I take this with more grains of salt, because he’s talking about SDR’s, and I’ve been a big proponent that the IMF was going to introduce SDR’s as an alternative to dollars in payments systems…

Well, I’m not Chicken Little, and I won’t go out on a limb saying what he said is going to happen to the dollar, but… It’s times like these that you get the feeling that maybe he’s right, and since SDR’s aren’t available to individuals at this time, the next best thing is Gold…

And looky there, Gold finally got some love last week… And while it did close down $3.30 on Friday, Thursday saw a nice rally in the shiny metal, the first one in over a week! What a world, we live in, eh? By that I ‘m talking about how Gold would seem to be on everyone’s agenda, as it rises almost daily given all that’s going on in the world, but it’s not on both accounts… I haven’t been to a cocktail party in a while, but the next one I go to, I’m going to ask the question… “Do you won Gold”? and see how many people honestly answer that question… I’m betting a dollar to a Krispy Kreme that very few say “I do”…

Have you been reading about all the turmoil that the Iran sanctions have caused the rest of the world? For instance, Germany does a ton of trade with the U.S. far more than any other country they trade with. But they also do somewhat smaller trades with Iran, and Germany didn’t like very much when the U.S. suggested that they should not be doing business with Iran… But what are they going to do about it? complain a lot, is about it… Because as I said, Germany does a ton of business with the U.S. and I don’t think they want President Trump as a Trade enemy…

One week, it’s all about a Trade War and the next week that talk fades and we’re on to something else… No wonder the price of Gold can’t seem to put together a multi-day rally, for no one can make up their minds!

There’s not much data around the world today, but tomorrow, we’ll get Chinese Retail Sales, and Industrial Production, a Eurogroup meeting, and an Economic Sentiment report as measured by the think tank ZEW in Germany. So, any add-on to the currency rally will have to come tomorrow, that is unless the U.S. does or says something to rile the markets again. The euro has climbed back above the 1.19 figure, the Aussie dollar (A$) has pushed higher in the 75-cent handle, and in Asia, the Singapore dollar (S$) recovered some of their losses from last week’s trading. The Swiss franc is at parity to the dollar this morning…

Last Friday, I was impressed with some readers who pointed out to me, that the Canadian dollar / loonie price was reported incorrectly! I apologize to all those that were knocked for a loop when they saw that I reported the loonie at 73-cents, when in fact it should have been 78-cents! My bad… fat fingers, the sun was in my eyes, I tripped on a rock, and heard somebody else call for the ball!

I got a big kick out of seeing my Dow Theory Letter from a couple of weeks ago regarding the euro, get tweeted and then retweeted… Here’s an except from that letter… “In 2012, one of the last years that I still traveled to speak to audiences from Vancouver to Panama (the country not the city in Fl) I would tell people that these austerity programs would cause the Eurozone to slow down, and even go into a recession, but when they came out on the other side in 5 or 6 years, their balance sheets would look better, and the euro would recover…

Then last June, I wrote in this space that the sentiment toward the dollar and the euro was beginning to change, and that this would lead to a rebound in the euro. The euro at that time was trading around 1.09… At last check, the euro was 1.21, and has been as high as 1.25. The new weak dollar trend appears to be in place, as Hedge Funds, investors, traders, etc. are shorting the dollar. ”

In last week ‘s DTL letter… I talked about Oil, and this week I’ll talk about the U.S. economy. I’m all over the place with topics that lead you to water… And that water is a diversified investment portfolio using currencies and metals..

The U.S. Data Cupboard is empty today, nada, nil, zilch, nothing here to report, but tomorrow, we’ll see the color of April Retail Sales, which I’m betting a free undercoat (HA!) that April’s numbers will be less than March’s numbers… Remember Easter was early this year…

To recap… The currencies made a comeback rally last throughout the day on Friday and in the overnight markets last night. They began this rally when the U.S. Jobs report was disappointing for a second consecutive month, with the avg. hourly earnings still on the canvas… Gold had a good day on Thursday, but wasn’t allowed to participate with the currencies’ rally on Friday. Chuck talks about something that James Rickards is telling his readers… Is he right? Only time will tell, eh?

For What It’s Worth… So, since I talked about what’s going on with Europe/ Germany and the U.S. regarding Iran… this article seemed to be very timely… and it can be found here:

Or, here’s your snippet: “With Europe having failed to prevent Donald Trump from withdrawing from the Iran nuclear deal despite sending both Macron and Merkel to Washington in an attempt to persuade him, the tension between Europe and the U.S. has escalated, and on Thursday morning, Merkel said that Europe can no longer rely on U.S. “to protect it.”

“It’s no longer the case that the United States will simply just protect us. Rather, Europe needs to take its fate into its own hands, that’s the task of the future,” Chancellor Angela Merkel said on Thursday in a speech commending French President Emmanuel Macron at prize ceremony in Aachen, Germany.

Then again, this is Germany, the same nation which only has 4 fully-functioning Eurofighter jets in operation.

Merkel also says that “we will make progress” together with France on banking union and capital markets union, though “these are difficult discussions”, and commented that German differences with France “don’t separate us, rather they always bring us back together.”

Merkel’s view on the fraying relationship with the U.S. echoes the earlier statement of the President of the European Commission Jean-Claude Juncker, who said during a Thursday address that Washington “had lost vigor, and because of it, in the long term, influence,” suggesting that Europe should take over the U.S.’s role as global leader.”

Chuck Again… Boy oh boy, this is going to get quite interesting folks, stay tuned!

Currencies today 5/14/18… American Style: A$ .7550, kiwi .6971, C$ .7817, euro 1.9147, sterling 1.3535, Swiss $ 1.00, … European style: rand 12.2350, krone 7.9811, SEK 8.5720, forint 263.48, zloty 3.5630, koruna 21.2955, RUB 61.87, yen 109.45, sing 1.3353, HKD 7.8491, INR 67.23, China 6.3352, peso 19.41, BRL 3.6013, Dollar Index 92.34, Oil $70.65, 10-year 2.98% , Silver $16.67, Platinum $925.85, Palladium $999.00, and Gold… $1,319.80

That’s it for today… Right out of the starters gates this morning I’m heading the grandson, Braden’s school for grandparents day… I’m flying solo on this one, as Kathy usually attends these with me… My beloved Cardinals hit one day, and not the next two, and then rinse and repeat… UGH! I cooked for the “moms” that were here yesterday… It took me an hour to clean up my Big Green Egg, but it was worth it, as the chicken and pig cluckers I made were delicious! I love my Big Green Egg, and love cooking on it… It went from winter to summer here, spring was two days while I was out of town! But I love it! I got to spend the day outside! America takes us to the finish line today with their song: Sandman… I used to play that song on my guitar.. I hope you have a Marvelous Monday, and Be Good To Yourself!

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

) The Daily Pfennig is no longer published by EverBank and it is now published by Aden Research Group.