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It’s All About The Dollar, Folks..

* Dollar still sits on top of the hill!..
* German IP starts the year strong!
* Chuck gives his opinion once again!.
* U.S. Trade Deficit Widens.. again!

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

Good Day.And a Wonderful Wednesday to you! A strange day yesterday for sure. I’ll be heading home on Friday this week, for the Memorial Service that will be held for my sister. I want to thank everyone who sent along a note with very kind words to help me reconcile the loss of another sibling. We started with 7, we are now down to 4, and I have two strikes on me! I feel the need to talk about how precious life is, and then my evil twin tells me to leave it there, don’t get sappy, and move along with the letter. I’m greeted this morning by the Marshall Tucker Band playing a real toe tapping song: Searching For A Rainbow

I laugh internally, because I’m sure some people think my evil twin has the conn over me every day! HAHAHAHA! Well, I was a real sleepy Chuck yesterday, but finally woke up when Kathy dropped me off in front of the stadium (because I can’t walk very far without excruciating pain in my back) and the chatter of the crowd outside the stadium, the smells of hot dogs being grilled, no, wait, here they call them “Dean Dogs” I tell you all that, as a way of apologizing for how late the Pfennig was delivered yesterday.. (I fell back asleep, and turned off the alarm when it went off!)

Well. Once again today, the dollar has the conn, and this time it has moved higher against most of the currencies.. The Dollar Index is knocking on the door to 102, and the overall feeling in currencies and metals is defeat. Yes, I said defeat.. The currencies and metals had started the year with a rally VS the dollar, and like last year when all the hype surrounding a rate hike talk, and it’s the same old song, this year. Of course this dollar surge could be short-lived if things go the way I see them going.. Don’t recall what I’m talking about? That’s OK, because I’m going to go through my thoughts right here ,right now, there is no better time or place!

Well, let me first preface this with the disclaimer.. This is my opinion, and I could be wrong. OK, now that we have that out of the way. I see the Fed hiking rates next week on the Ides of March, and after a couple of months the economy begins to unwind and loans begin getting defaulted on, and the labor market starts to reverse itself, and the Fed wanting to be pro-active to not let this weakness in the economy turn into a recession, they begin to reverse their rate hikes, and then everyone in the markets knows that the Fed failed, and the dollar begins to get sold like funnel cakes at a State Fair.. So, there you go! That’s how I see it all unfolding, and who wouldn’t see it like this when you have a Central Bank that is whiskey bent and hellbound to hike rates when the economy is so uneven and soft.

Want some ammunition for the next time you attempt to defend your stance on the economy? Well, this was in my local St. Louis Post Dispatch newspaper, and all they do is copy and paste articles from other news services, so if the Post has it, just about every has it. But I’m going to go through a list of brick and mortar retail shops that are having problems.

JC Penney, Macy’s, Vanity Shop, HHGreg, Inc., Gordmans stores, Radio Shack, Neiman Marcus, Family Christian, Gander Mountain, and Payless. All of these retail corporations are closing stores, restructuring debt, laying off workers. And this is just a partial list! And interest rates need to be raised because?

OK, let’s move in a different direction, I get the feeling I would be getting in trouble if I continued talking about all that! Alrighty then. Germany printed a stronger than expected Industrial Production report . German IP grew at 2.8% in January VS -2.4% in December, and 2.7% forecast. This is a good start to the year for the German economy, and currency traders are acknowledging that with backing off their selling of the euro, which has allowed the single unit to remain range bound, and not affected by the dollar surge.

China post a very bad Trade number, but one has to look at it differently to get the full feel for the report as to whether it’s bad or not. 1. Imports surged in Feb, and outpaced exports, which should indicate that Domestic demand is strong. 2. Exports only grew 4.2%, and caused the Trade number for February to be a negative. 3. Before you go out to the street to begin acting like Chicken Little, let me point out that the report is all skewered because of the Chinese New Year weeklong celebration. It’ll take a couple of months before this data represents a true picture of what’s going on.

The Bank of Canada (BOC) meets today. I’m not expected any surprises But remember BOC Gov. Poloz and his background as a “trade guy”, who always wanted a cheaper loonie. But Canada doesn’t have much to work with regarding rates, given that their internal rate is 50 Basis Points. the loonie has really backed off its lofty levels of a couple of weeks ago, and it’s more about the U.S. looming rate hike than it is the price of Oil these days.

I don’t know where to begin with kiwi.. Talk about a disappointment. I guess that’s what I get for slapping myself on the back, right? I still think that the markets are giving us an opportunity to buy at cheaper prices ahead of a rate hike, but now those “cheaper prices, have become even cheaper! UGH!…

Gold had another bad day yesterday as it was taken to the woodshed for a real old fashioned whacking losing $9.50 on Tuesday, after losing $9.20 on Monday! It’s all about the dollar folks. what’s going to be the trigger to reverse all this hype for the dollar? Well, as I talked about above, I believe it will be this upcoming rate hike.

The U.S. Data Cupboard yesterday had the Trade Balance for January, and once again it was a deficit, and once again it widened! The US. Trade Deficit for January was $48.8 Billion VS $44.3 Billion in December.. This is not a good thing folks. And January gave consumers the chance to put the credit cards away after the Christmas shopping season in December, and Consumer Credit grow $9 Billion in January, VS $15 Billion in December..

Today’s Data Cupboard has the ADP Employment Report, which is supposed to give us an indication of the Friday BLS hedonically adjusted Jobs report.. Fat chance of that happening, but we look at nonetheless. We’ll also see 4th QTR Productivity, which had been lagging and causing real concern among economists. The forecasters are only seeing a 1.5% increase in Productivity, and that’s not very strong.

To recap. the Dollar still has the conn, against most of the currencies and metals this morning. It’s all about the dollar folks. German IP was strong to start the year, and China printed a Trade report that has timing problems with their Lunar New Year, and a true report won’t print for a couple of months. Chuck goes through his thought on when the dollar strength will turn around, and he thanks everyone for their kind words yesterday.

For What it’s Worth.. Well, once again the well is dry for a FWIW article.. But I do have this that I should have had in the body of the letter, but oh well, it’ll fit here.. This is about China reserves, which I had told you were dropping as they defended the renminbi. Well Reuters says they reversed that trend last month. You can read it all here:

Or Here’s your snippet: ”
China’s foreign exchange reserves unexpectedly rose for the first time in eight months in February, rebounding above $3 trillion as a regulatory crackdown and a steadying yuan helped staunch capital outflows.

The rebound in reserves could ease fears in global markets that China will engineer another sharp one-off devaluation of the yuan, which would run the risk of inflaming trade tensions with the new U.S. administration under President Donald Trump.

Reserves rose $6.92 billion during February to total $3.005 trillion, their first increase since June 2016, central bank data showed. That compared with a drop of $12.3 billion in January, when reserves fell to $2.998 trillion.

Economists polled by Reuters had expected forex reserves to drop by $25 billion in February.

Capital Economics said last month’s rise suggests China’s central bank “purchased foreign exchange in February and that capital outflows stalled”.

Chuck again.. Now that was good news from China, you know the country that was supposed to have seen its economy collapse let’s see now, I think I began hearing that about 7 years ago..

Currencies today 3/8/17: American Style: A$ .7560, kiwi .6945, C$ .7443, euro 1.0560, sterling 1.2150, Swiss $.9871, .European Style: rand 13.0194, krone 8.4587, SEK 9.0089, forint 293.52, zloty 4.0813, koruna 25.5860, RUB 58.13, yen 114.08, sing 1.4143, HKD 7.7667, INR 66.67, China 6.8998, peso 19.57, BRL 3.1290, Dollar Index 101.98, Oil $52.80, 10-year 2.54%, Silver $17.43, Platinum $958.60, Palladium $768.27, Gold $1,213.30, and SGE Gold $1,241.34

That’s it for today.. Well, there’s some activity in the condo this morning.. We have visitors! Friends, Steve and Lynn Hughes came down to spend a couple for days with us, which I love visitors! Our Blues won a tight game last night, it’s getting near the time you have to win those tight games, because in the playoffs they are all like that! Yesterday started out rainy, but the rain stopped when it was time to play baseball, and then the sun came out! I hope that happens again today, for it looks iffy out there this morning! I heard from one of my fave people in the world yesterday.. Kristin Kuchem sent me a text , wanting to know when I was going to be back in town. Kristin is Kathy’s cousin, so we can nip any suspicions in the bud there! Alrighty then time to get out of your hair for today. Graham Nash takes us to the finish line today with his song: Simple Man. (I used to be able to play this one on the piano) Now go out and make this a Wonderful Wednesday, and Be Go
od To Yourself!

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

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