It’s FOMC Day!

A Pfennig For Your Thoughts

September 26, 2018

* Currencies remain in dullsville…
* Europe finalizes their new payments system…

Good day… And a Wonderful Wednesday to you! All the hope for a good series VS the team in front of the Cardinals has come crashing down all around us! UGH! It appears that the hard charge the Cardinals put on in August, and early September, is going to turn out to be for naught… But being the eternal optimist with this stuff, there are still games to be played, by all parties involved, so we’ll see… Alvin Lee and Ten Years After greet me this morning with their song: Choo Choo Mama…

Another day yesterday, and another day of tight trading ranges… The euro has been trading around 1.1765 for 3 straight days, and all the other currencies fall in behind with little to no movement coming in ahead of the Fed’s FOMC meeting today.

Early this afternoon we’ll see the color of the Fed heads rate hike, and their outlook going forward… I really thought, earlier this year, that by now the Fed would be rethinking this rate hike cycle they’ve been in since 2015. And I expect the dollar to reverse some of the losses it has taken on in the past week… There’s always that chance that the rate hike doesn’t lead to dollar strength, if the rate hike was already priced in by the markets.

Gold can’t seem to shake the $1,200 level, which is fine with me, given the rate hikes and all that… Besides it sure does give investors looking to diversify with metals a cheaper price to buy, eh?

The price of Oil has really moved higher ever since President Trump called for cheaper Oil prices… And with the price of Oil trading in the $72 handle, the Petrol Currencies, led by the Russian ruble are at least getting a little love from traders. The ruble though, has pushed downward to below the 66 handle, and that looks pretty good to me. The direction, that is… Remember the ruble is a European Priced currency, so as the trading level of the ruble goes down, it’s really rallying, because it would take less of the currency to make a dollar.

Since the currencies are in dullsville, I’ve been wanting to get this off my chest, so here goes…

Yesterday, I told you that the negotiations on the Trade Talks between the U.S. and China had been ditched… And then I received word that China says that they can withstand the tariffs that have been placed on their exports by increasing domestic consumption, investment and business sentiment in order to protect the economy from the impact of U.S. tariffs.

Now, longtime readers may recall me telling them years ago that China was going to insulate themselves from another financial crisis in the U.S. by increasing domestic demand… They talked about increasing domestic demand, but then the world began to rebound and Chinese exports were once again leading the Chinese economy… Now fast forward to now, and look what China’s talking about again? Increasing domestic demand… Well, maybe this time they’ll take this challenge seriously, because they sure didn’t previously!

The thing that I think about all the time, is something my dad used to tell me when I was a young man… he would tell me that China is a sleeping bear, and we as a country had better not ever wake the sleeping bear up… All these tariffs might be the thing that wakes up the sleeping bear… Think about that for a minute, what country has the second largest economy, with a very large population? That’s right, it’s China…

And IF China wants to seriously increase domestic demand, then watch out, because they certainly have the population to achieve that feat!
An economy the size of China’s with their export prowess, and a strong domestic demand economy, could rule the world! I mean that, I truly do, folks… And it looks like we could be waking up the sleeping bear…

OK… got that off my chest and I feel much better! The New Zealand dollar / kiwi, moved positively yesterday (small moves) on the news that New Zealand Business Sentiment had improved last month. The Business Sentiment is still negative, but the improvement of the index was very noticeable and so kiwi was allowed to move a bit stronger.

While we’re talking about New Zealand and the kiwi, it would be a good thing to tell you that the Reserve Bank of New Zealand (RBNZ) will be meeting tonight, (tomorrow for them). Late last year, the RBNZ was hinting about a rate hike coming by this summer… I jumped on that “hint” and told you dear readers that it was good thing to buy ahead of a rate hike…

Well, things didn’t quite work out like I thought the RBNZ was hinting at, but the RBNZ could save face with me, if they hiked rates tonight… Unfortunately, that’s not going to happen, and once again we’ll be looking for any new hints in the statement following the no rate move announcement. UGH!

It appears that Europe has finalized their development of a payment system that would be outside of the dollar and the U.S.’s control. So, as I’ve previously talked about, now Europe has a payment system, and Russia / China have their payment system.. Mark you journals for this will be the cause of the dollar losing its reserve currency status… It’s not going to happen overnight! But as these payment systems begin to be used, and used more, the reliance of countries on dollars will be removed… I’m just saying…

The U.S. Data Cupboard yesterday had the Case/ Shiller Home Price Index for July, and it showed that home prices had slipped for a second consecutive month… I’m not sure what to think about that, other than if this is a trend, it’s not going to be a good thing… But two months of data isn’t exactly an etched in stone trend… So, we’ll have to keep an eye on this data next month…

The Fed’s FOMC Meeting takes place today, and that is the only thing listed on the Data Cupboard’s roster on this Wonderful Wednesday!
To recap… The currencies are in dullsville, Gold can’t get past $1,200, and the price of Oil is still rising. Chuck gives us his thoughts on waking the sleeping bear, and Europe has finalized the development of an alternative payments system to SWIFT…

For What It’s Worth… OK, since the markets focus today will be on the Fed’s FOMC Meeting, I thought this piece that the MarketWatch people sent me is FWIW worthy, especially on rate hike day here in the U.S. and the article can be found here: https://www.marketwatch.com/story/a-first-ever-fed-september-interest-rate-hike-could-set-stocks-reeling-wednesday-2018-09-25?mod=MW_section_top_stories

Or, here’s your snippet: “With the Federal Reserve all but certain to raise interest rates on Wednesday, investors may need to brace for sudden, unexpected market volatility as stocks have been underperforming on Fed Days in recent months.

Data published by Bespoke Investment Group Tuesday indicate that stocks, on average, fell 0.13% on the last 10 times the central bank held its policy meetings.

Adding to potential trouble, George Goncalves, head of U.S. rates strategy at Nomura, notes that a Wednesday rate hike would mark the first time that the Fed has tightened in September, a month in which the stock market historically has not performed well.”

Chuck again… At some point interest paid on money market account and band deposit accounts will be competition for the stock market. It’s difficult to call at what rate that would come into play, but it’s getting close, I can feel it…

Currencies today 9/26/18: American Style: A$ .7258, kiwi .6656, C$ .7720, euro 1.1762, sterling 1.3153, Swiss $1.0340, European Style: rand 14.2843, krone 8.1155, SEK 8.8222, forint 275.20, zloty 3.6427, koruna 21.7574, RUB 65.78, yen 112.90, sing 1.3652, HKD 7.8121, INR 72.51, China 6.8647, peso 18.97, BRL 4.0952, Dollar Index 94.21, Oil $72.12, 10-year 3.08%, Silver $14.47, Platinum $827.11, Palladium $1,064.50, and Gold… $1,198.74

That’s it for today… I had a great lunch yesterday with good friend Duane, as we visited a new lunch place for us… Then sat outside to watch the baseball game with good friend Mike, but we only lasted 5 innings… My oncologist wasn’t none too happy with me yesterday, when I told her about my recent nasty fall… She wanted to wrap me in bubble wrap! I guess she likes me? And why wouldn’t she? Everybody likes Chuck! HAHAHAHAHAHA! Stevie Ray Vaughn takes us to the finish line today with his song: The Sky Is Crying… I hope you have a Wonderful Wednesday, and remember to Be Good To Yourself!

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