Kiwi Gets The Ball Rolling!

Good day… And a Marvelous Monday to you! Whew, I really missed the boat on Friday, I was so much in a fog that I completely forgot to mention Mother’s Day! And what a day it was here in Midwest. It was absolutely beautiful, as are all the mothers out there! Man, I usually have a poem for Moms, and gush about how my mom was so influential in my life. I miss you mom… And so, I apologize to the end of the earth and hope all you mothers can forgive me, for my omission on Friday.. UGH, I do have a tiny defense, in that I was under the influences of my chemo treatment on Thursday, but even with that, I still feel like a real heel, this morning… Kansas greets me this morning with their iconic rock song: Carry On My Wayward Son…

Well, the non-event days of Thursday and Friday last week were thrown to the curb overnight, and the dollar lost the conn. It all began in New Zealand, where 1st QTR Retail Sales grew 1.5%, VS the previous QTR’s print of 0.9%. The April print was far better than forecast, and kiwi responded favorably. That got the ball rolling on an overnight rally in the Commodity Currencies.

There was a brief pause in the rallies by the Aussie dollar (A$), kiwi, the Canadian dollar/ loonie, and S. African rand, when China printed a worse than expected Industrial Production figure that the Government quickly explained away, reminding the markets that the print was short a week because of the holiday week… Well, that news from New Zealand, as I said got the ball rolling, but for how long? Today, the Deputy Dawg, I mean the Deputy Gov. of the Reserve Bank of New Zealand (RBNZ) will speak, and I would bet a shiny quarter that he will throw kiwi under the bus… It will be interesting to see how kiwi traders react..

Then, overnight, came word that Russia and Saudi Arabia had come to an agreement on the production cuts that would take the cuts into next year. The price of Oil bounced to the $49 handle, and the Petrol Currencies took their cue to rally, and so the currencies of Russia, Norway, Brazil, Canada, and even Mexico were firmly on the rally tracks when I opened up the currency screen this morning.

So, with the Commodity & Petrol Currencies all taking shots at the dollar the euro was able to push back against the dollar too. The Dollar Index is back below 99 this morning, and Gold, after closing up $2.90 on Friday is up $3.70 so far this morning in the early morning trading. It will be interesting to see if the currencies and metals and Oil can all hold these gains and then add to them tomorrow…

A couple of weeks ago, I was talking about how the euro, which I call the Big Dog, was being viewed differently again by traders. No longer did it look like traders feared a breakup of the euro. Of course had they just read the Pfennig a few years ago, when the likes of Paul Krugman, were saying the euro was going to break down, and Germany was going to be on their own, blah, blah, blah, I said “there’s no way that Germany is going to be the cause of the breakup of the euro”… And while the euro has looked weak on occasion, falling to 1.05 a few times in the past couple of years, let me remind you that $1.05 is not parity or below like the Krugmans of the world were calling for. And also let me remind you that 1.05 is better / stronger than a dollar! So, these days, everyone says the dollar is strong… But not as strong as the euro!

The United Nations recently printed a listing of the top economies of the world… #1? Well, according to James Rickards The United Nations ranks the Eurozone the largest GDP nation at $18.5 Trillion. The U.S. was next with $18 Trillion, according to James Rickards… The IMF has the two nations switched… Well, the point here is that the Eurozone is resilient, and strong, and while it has its warts (Greece, Italy, the fact is, the Eurozone is here to stay… let’s not forget that the U.S. has its warts too… California, Illinois, New York, Detroit, and Orange Country… (there are more, but you get the picture)

It’s always easier to point out other people’s faults, right? When the old saying that people who live in glass houses shouldn’t throw stones, comes into play here.

So, if Friday was all about Retail Sales, then there wasn’t much there in end… U.S. April Retail Sales grew at 0.4%, better than the average bear, like the BHI told us it would be, unfortunately though, it was worse than expected, which was 0.6%… Just another sign to me, given that like I kept reminding everyone, that Easter fell in April. And therefore the U.S. consumer has “tapped out”… So shouldn’t April’s Retail Sales be stronger than expected? Or at least be equal to expectations? Certainly not below expectations, as long as the U.S. consumer has disposable income… I know I don’t!, Shoot Rudy, you should see the bills I have to pay from my hospital visit in March, and then the Pacemaker operation! I have my personal spending money for a little food, a little drink, and a little fun… And that’s it… But this month will be better! And that’s what all the head in the sky economists are saying… Next month will be better!

The stupid CPI edged down in April and only grew 0.2% and Consumer Confidence grew to 97.1 from 97! So, everyone is confident apparently, but not spending money… Wait! What? That makes no sense to me nor should it to anyone with half-a –brain, which describes me perfectly! HA! But seriously, what kind of bunk are the people that put these reports together attempting to pull over our eyes? This is crazy… people are confident but not spending money…

And as long as we’re talking about data… The “Auto Apocalypse” was in full view on Friday, after on Thursday, Macy’s and Sears reported awful numbers, and on Friday JC Penney reported awful numbers too… I read that these are the worst times for Retailers since the last “official” recession. In fact here’s piece from the St. Louis Post-Dispatch… “More than twice as many stores have closed this year than at the same point last year. Bankruptcies are far outpacing last year’s rate. Retailers slashed jobs at the sharpest pace in seven years this spring. And retailers collectively could report the biggest drop in first-quarter profits since 2009.

And the whole article can be found here:

Well, there I was on Friday, just awake from a short nap, and reading the 5 Minute Forecast, and lo and behold, there was my name up in the lights! The “5’s” governor, if you will, Dave Gonigam, thought that what I talked about in Friday’s Pfennig regarding the Treasury auctions, was worthy, and that made me smile, for I’ve told you plenty of times before I love it when I see my name up in the lights! Well, that got me thinking, that if he liked that piece, he would really like what I had to say about Treasuries and their upcoming problems, in the January Review & Focus. (remember the one I said I thought was the best one I ever wrote?) You don’t have to go fishing for that article, I have the link to it right here:

But I thought a quick and dirty refresher in the form of a paragraph from that R&F would work here for those of not sure you want to take the time to click the link above… Here’s a piece of that R&F from January…

Oh, and one more thing. Russia, the other Big Dog in the world that used to buy Treasuries, has found a new way to sell their oil. They’ve circumvented the petrol-dollar scenario, where all oil sales are paid for with dollars. Last year, Russia announced that they had agreed to sell a large amount of oil to China, and accept renminbi as payment. At the time of the announcement I told people that this was HUGE, but no one paid attention. They should have, because at about the same time, China was announcing that they were going to sell gold on the Shanghai Gold Exchange (SGE) denominated in renminbi (or yuan, either one is acceptable).

So, this is what Russia does with their renminbi that they receive from their oil sales to China—they simply take the renminbi, and buy gold on the SGE! And Russia’s gold accumulation is something to behold these past couple of years. It’s a strategic move by Russia led by its Central Bank Governor, Elvira Nabiullina, who sees gold reserves as a way to improve the Russian balance sheet, other than accumulating rubles or other foreign currencies in reserves. And given that gold gained 16% in 2016, that’s better than a sharp stick in the eye for the Russians.

I know, I know, that was two paragraphs… I’m guilty of getting a little jiggy with the cut-n-paste! HA!

Well, did you hear about the global hacking that took place on Friday, and began in the U.K. with hospitals, and then quickly spread across the globe? This cyber warfare is going to keep getting more prominent in my humble, country boy, opinion… Man would I love to have gone a different direction 25 years ago, and learned how to code. And if I had Biff’s almanac from Back to The Future, I would know to concentrate on defense software against cyberattacks, boy would I be in demand these days… No, I don’t want a Bentley, I would prefer my own island!

The U.S. Data Cupboard is basically empty today, except for the Empire Region PMI (manufacturing index)… And that’s not a market mover, but it is the only show in town today, so a little more scrutiny than usual for this data will be the call to order. Tomorrow we’ll see two of my fave economic prints: Industrial Production and Capacity Utilization, but after those two print, the Data Cupboard goes bare again for the rest of the week… Whenever there’s not a lot of data, the dollar seems to gather steam, since there is nothing bad printing to bring the dollar down… But we’re starting the week with the currencies in the driver’s seat, (great song!) so, it will be interesting to see if that no-data, dollar gains steam, scenario continues to play out…

To recap… Very strong 1st QTR Retail Sales in New Zealand got the ball rolling overnight for the commodity currencies. Then news that Russia & Saudi Arabia had come to agreement on production cuts, was responsible for a bump higher in the price of Oil, and that allowed the Petrol Currencies to get off their duffs and rally too. All this led to the euro being bought, and Chuck gives a dissertation on the euro for your reading pleasure today. Not much in the way of data this week in the U.S., and Gold is up $3.70 in the early morning trading today.

For What It’s Worth… My good friend, Dennis Miller of moved his retirement home from Florida to Arizona a few years ago. He told me, the weather is more consistent, the Cubs play their spring training games here (he’s a lifelong Cubs fan) and wanted to breathe better… Well, according to this article that ran in the Arizona Times ( ) there’s a new reason for his move! It appears that lawmakers have passed a bill, that still needs the Governor’s signature, and there’s questions of whether he will sign it or not, to remove the taxation of the sale of Gold & Silver Coins and bars that were purchased at the U.S. Mint… You can read the article by clicking the link above..

Or, here’s your snippet: “Want a way to avoid taxes on your capital gains?

State lawmakers gave final approval to legislation today providing a way to do just that. But it remains unclear whether Gov. Doug Ducey is willing to go along.

Arizona law says if someone invests in something, whether art, collectible cars or commercial real estate, and then sells it for more than the cost, that difference is subject to state income taxes.

What HB2014 seeks to do is carve out an exception when people invest in gold and silver coins produced by the U.S. Mint.

But Rep. Mark Finchem, R-Oro Valley, said this isn’t some tax scam.

He said it reflects his belief that the purchase of gold and silver coins with federal reserve notes – those dollar bills now printed by the government – is simply an exchange of one form of currency for another. Finchem said that would be like taxing someone for exchanging two dimes and a nickel for a quarter.

What’s really behind this, though, is a particular political philosophy that those dollar bills are not worth anything.

“Yes, we still exchange it,” Finchem said. “But we pretend it actually has some value.”

What has real value, Finchem said, are coins with precious metals.”

Chuck again… Makes sense to me! Like exchanging two dimes and a nickel for a quarter! Love it!

Currencies today 5/15/17… American Style: A$ .7440, kiwi .6910, C$ .7350, euro 1.0970, sterling 1.2930, Swiss $.9979, … European Style: rand 13.1967, krone 8.5037, SEK 8.8125, forint 281.97, zloty 3.8372, koruna 24.1680, RUB 57.07, yen 113.50, sing 1.3983, HKD 7.7871, INR 64.04, China 6.8989, peso 18.67, BRL 3.1265, Dollar Index 98.87, Oil $49.18, 10yr 2.33%, Silver $16.65, Platinum $931.21, Palladium $814.18, Gold $1,231.60, and SGE Gold… $1,237.92

That’s it for today… I hope all the Moms had a beautiful Mother’s Day… I cooked for about 30 people at the house. The Big Green Egg was working overtime! Cardinals take 2 of 3 from the Cubs over the weekend, so it was a good baseball weekend too! Congratulations to son Andrew and his Lindberg High School Water Polo Team, who took 3rd place in the State Tournament. The team got an inspirational lift from their fallen teammate, who was able to attend the game in his special wheelchair. I mentioned what happened to this young man on Friday, and I still shudder thinking about that. It’s such a sad story, that hopefully one day will become a triumphant story for the young man. Al Stewart takes us to the finish line today with his song: The Year of the Cat… And with that I bid you farewell today, with hopes that you have a Marvelous Monday.. Be Good To Yourself!

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

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