It’s All About the euro/ dollar Cross!

Good day… And a Wonderful Wednesday to you! Mikey, Mikey, what day is it? It’s Hump Day! I loved that commercial! But then I do believe I’ve told you that before, so come on Chuck, get with the program here, and talk about stuff you haven’t mentioned before! Sorry! But I’m really draggin’ the line today, and will be lucky to fill the normal space allotted for the letter today, without nodding off! I’ve got a good one for all you that are my age and older today… Dion and the Belmonts greet me this morning with their song: The Wanderer… (and sorry Jerry, that song is not about you! HA!)

Well, the currencies are mixed this morning… None of them are selling like funnel cakes at a State Fair, but the ones that aren’t associated with the euro, are flat… However, the euro is kicking tail and taking names later these days, and yesterday, and overnight have been no exception. The euro it does seem has taken a flyer on the dollar’s move when the tables were reversed.. You see, here in the U.S. we have a potential political firestorm, and in the Eurozone, the political risks have faded… (Netherlands and France both saw elections cement European Union continuance) The dollar, is selling off on political risks, while the euro, benefits from this dollar selling… The euro is also dragging along the euro-lites, like the Norwegian krone, Swedish krona, Danish krona, and Swiss franc, along with the Euro-Wannabes, like the Czech koruna, Polish zloty, and Hungarian forint. As far as the other currencies are concerned, they are flat, which means they have held their gains from the overnight session Monday, through two U.S. trading sessions…

It’s not bad data like the U.S. continues to print, or better data like the Eurozone continues to print that’s moving the markets, so that fundamental is not in play here, it’s all political pressures/ risks.. I have to question just how long something like this can play out. But while it’s going on, it’s good to see the euro ratchet up VS the dollar every day, like things used to be in the early years of the weak dollar trend that began in 2002… 2001, I wrote a white paper, titled, The Year of the Euro… Maybe I should get that out and shake off the dust, and see if it makes sense to reissue it. Nah… what are you thinking, Chuck! That’s too old, and the stuff you wrote about then, wouldn’t be in play now! OK, I get it, but I was just attempting to relive the early days of the weak dollar trend…

Overnight, the euro traded as high as 1.1115, but has seen some profit taking in the European session, and is trading just below the 1.11 figure at 1.1096, as I write… Still a long way from where it was last week! Could this political scenario in the U.S. be the Minsky Moment I spoke of last week? I don’t really think so, because the Minsky Moment I’m looking for will take no prisoners, that are associated with the dollar… When the stock markets finally gives up the ghost of bubble past, will there be a flight to Treasuries? Well, if there is that flight to Treasuries, then that could help the U.S. with their funding problem. I’ve talked about how China, Russia, and Saudi Arabia are the Big 3 that have been pulling away from the Treasury Auction window, at a time when the U.S. is increasing their deficit spending, thus needing to issue more Treasuries, and I questioned who was going to buy them… Well, the answer might be in a stock market selloff..

Chris Gaffney sent me a note yesterday and said that what Deutsche Bank analyst Jim Reid, was saying in a research report that he gets, played well with what I’ve been saying… So, here’s a snippet of the piece that Chris was talking about.. “it is interesting to see that these record highs for equity markest are happening as measures of global data surprises plummet to muti-month lows. Indeed a closely followed global measure has fallen to the lowest level since November last year, while a U.S. only measure is at the lowest since last May and well into negative territory now. A strong earnings season has undoubtedly been a big driver recently, and the overriding trend, although it also perhaps reflects fow far expectations for economic data have come in recent times.” –Jim Reid from Deustche Bank

Yes, the markets just keep shrugging off economic data, especially here in the U.S. and that drives me nuts! But, I have to keep telling myself that, It is what it is, and then move along before my head explodes!

The Reserve Bank of Australia (RBA) made a BIG deal out of their discussion of the labor market in Australia as evidenced by the minutes of their last meeting that printed just the night before. I tell you this, because tonight Australia will print their latest labor report, funny how all that just seems to line up, eh? Some of you may recall me talking about the blow out labor report for March with the Unemployment Rate dropping and rainbows and lollipops picture for Aussie labor… Well, the April report, which will print tonight, is going to most likely show a pullback from those lofty numbers of March, but not be anything negative for labor, and I’m sure the RBA will look at it as a whole, and not as individual months.

But there is a risk here that the “pullback” could be larget than expected, and that could potentially knock some stuffing out of the Aussie dollar (A$)… And then if the “pullback” isn’t anything to write home about, the A$ could potentially rally on that!

The Canadian dollar / loonie has been range trading lately and certainly looking for something to help the loonie break out of this range. That “something” could very well come today when they print their latest Manufacturing Sales report. However, I continue to think that the real break in the range could come next week, when the OPEC nations meet, for I also continue to think that what comes of the meeting will be good for the price of Oil, and what’s good for the price of Oil is usually good for the loonie..

In the U.K. yesterday, they printed a better than expected (or shouldn’t it be considered worse?) inflation report, with CPI ratcheting up to 2.7%! I’ve got to get this off my chest, right here, right now… A ton of the April prints have been skewered by the timing of Easter this year, and this inflation report plays right into that, as they saw an 18% increase in airline prices around Easter, thus driving U.K. CPI even higher than expected, which was 2.4%.. The pound attempted to rally on this news (see how strange things are these days, as a currency rallies on higher inflation? Wait! What?) but the rally had a governor on it, and couldn’t really mount much in the way of increases as the day went along.

And don’t think for a minute that these political pressures/ risks here in the U.S. haven’t had anything to do with the Gold rally this week. Yes, the moves have been small, but even the short paper traders, who have become so bold, and usually don’t care what’s going on or the timing, when they go to trading their short paper trades, don’t even feel good about trading short paper trades right now…

So, Gold gained $6.30 yesterday to close at $1,236.70, but the BIG move in Gold has come in the early morning trading today with the shiny metal up $9! Wait until the short paper traders arrive at their desks today and see that! That’s a BIG GULP they just took, and then have to decide whether or not they brazenly step in to short Gold or not… I read the other day where James Rickards said that Gold would be $1,300 by the end of summer… Interesting, eh?

The U.S. Data Cupboard finally saw some good data yesterday! WOW! It’s been awhile, but April Industrial Production (IP) grew at the fastest pace in over a year! April IP grew at 1% VS the 0.5% expected, and the downward revised March print of 0.4%… I was reading the recap of the data on MarketWatch and they said something that caught my eye… They said that “Manufacturing was hurt by the strong dollar in 2015 and 2016, but business investment has picked up in 2017.”

Now… think about that for a minute.. Isn’t that what I kept telling you when the Factory Orders, Manufacturing, IP and other prints were sour, that the strength of the dollar was playing a big part of their sour prints? Why, yes, Chuck, you did tell the readers that! And for that you get a Gold Star today! HA!

The U.S. Data Cupboard is empty today.. nothing, nada, nil to report on.. .So, let’s move along to the Big Finish…

To recap… It’s all about the euro / dollar cross folks… The Policial pressures/ risks tables have been turned on the U.S. as the euro passes the torch of Political pressures/ risks to the U.S. The euro is trading near 1.11 this morning, and dragging the Euro-lites, and the Euro-Wannabes along for the ride. The rest of the currencies are still holding their gains from Monday, but are flat today. The loonie continues to range trade, and is looking for a good outcome from the OPEC meeting next week. Gold is the BIG mover this morning, up $9 in the early morning trading, after gaining $6 yesterday.

For What It’s Worth… For years, I fielded questions from interviewers, investors, and just people that were interested, about the overbuilding in China, and what would the Chinese do with all these empty office buildings,etc. My answer to them was always, the Chinese know what they are doing, and they will fill them them when it’s time. Well, according to this article on Bloomberg the time is now… here’s where the article is :

Or, here’s your snippet: “Zhang, now 27, still has his job. The once empty skyscrapers, vacant office towers and unfinished hotels and apartments are gradually filling up amid the central government’s renewed push to refashion the city into a crucial gateway for a revitalized Northern China.

“They’re not full, but are increasingly occupied,” said Michael Hart, a managing director at real-estate broker Jones Lang LaSalle Inc. in Tianjin. “They’re mostly government driven, but there are signs private industries are coming.”

In the Binhai district, empty offices are filling up with staff from private companies as well as employees of some of the biggest state-owned enterprises, such as China National Chemical Corp., railcar manufacturer CRRC Corp., and China Poly Group Corp., a conglomerate with businesses ranging from explosives manufacturing to real estate.”

Chuck again.. I love it when a plan comes together! And it’s coming together in China, and soon no one will be asking me about the overbuilt China again! YAHOO!

Currencies today 5/17/17… American style: A$ .7405, kiwi .6890, C$ .7345, euro 1.1107, sterling 1.2955, Swiss $.9836, … European Style: rand 13.0944, krone 8.4387, SEK 8.7791, forint 278.45, zloty 3.7704, koruna 23.7828, RUB 56.61, yen 112.35, sing 1.3944, HKD 7.7871, INR 64.10, China 6.8968, peso 18.68, BRL 3.1140, Dollar Index 97.98, Oil $48.82, 10yr 2.29%, Silver $16.90, Platinum $941.72, Palladium $769.94, Gold $,1245.60, and SGE Gold $1,247.25… (with Gold moving up by $9 in the early morning trading, the SGE Gold price had already closed, so it will play catch up tonight)

That’s it for today… Well, my beloved Cardinals wore their throw back uniforms to celebrate their 1967 World Series victory against the Red Sox last night, but lost the game to the Sox! Maybe the Cardinals should go back to the old Busch Stadium to play the Sox, because they haven’t figured out how to beat them in the new stadium! UGH! Another beautiful day yesterday, a bit windy, but then who else is peaking out from under the stairway, calling a name that’s lighter than air? HA! Our friend, Billy Squier, takes us to the finish line today with his song: My Kinda Lover… Ok, I’m ready to head off to dreamland, I hope you have a Wonderful Wednesday, and Be Good To Yourself!

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

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