Let The Dovish Talk Begin.

* Currencies are rallying VS the dollar.
* Iron ore prices rally for two days.
* China talks more RRR cuts.
* Martin Weiss talks BRICS! .

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

Good day.. And a Wonderful Wednesday to you! Well, no new baby news, no Luke and Lara updates, and the Cardinals broke the bats out last night. That’s about it, thank you and have a great day! Well, there’s something else going on today, that everyone, but me, is all lathered up about, and that’s the end of the FOMC Meeting, which will have a statement by Janet Yellen in which every word, and the tone in which she said the word will be scrutinized by the markets. I usually don’t get all that “into” what they say, it’s what they do that drives me crazy. But in the end, I believe the talk will be dovish, as the Fed begins to grease the tracks for the no-move in June.

Well, yesterday was quite the day for the currencies, and even Gold got into the banging on the dollar as the day went along. But that was yesterday. Overnight we’ve seen some profit taking, as the currencies have had quite a run on the dollar lately. The Aussie dollar (A$) traded over 80-cents yesterday, just a couple of weeks ago, the A$ was trading below 76-cents. The Canadian dollar / loonie a couple of weeks ago was trading with a 79-cent handle, and yesterday the loonie reached 83-cents.. So those are just a couple of examples of the currency moves, before of the past couple of weeks, before last night’s profit taking.

The British pound sterling and the euro are two currencies that are adding to their gains the past couple of weeks. But the best performer overnight is the Swedish krona, and this rally came about because the Riksbank left rates unchanged, when a rate cut was all but considered to be a done deal. You may recall that Sweden already has negative rates -.25%, but the Riksbank decided against digging the hole deeper. All the short krona trades based on the thought that a deeper hole would be dug with negative rates, had to be reversed, and that has led to a huge move for the krona overnight.

We’ll get two Central Bank decisions tonight. One from the Brazilian Central Bank (BCB) and the other from the Reserve Bank of New Zealand (RBNZ). I suspect that the BCB will hike rates one more time to close out this rate hike cycle and bring their internal rate to 13%… While the markets and economists are on the fence about what the RBNZ will do at their OCR Review this evening. OCR is the Official Cash Review, where interest rates will be discussed. I think the RBNZ is going to grease the tracks for what they feel is needed, a rate cut at a future meeting. If they do, kiwi should take cover, for the selling might be harsh.

The Chinese renminbi / yuan was allowed to appreciate again last night, and the renminbi is now trading below 6.12 spot. The renminbi has been bucking the trend of currencies getting weaker VS the dollar, by holding Steady Eddie, and when it came time to appreciate with the other currencies, it did so. I think this is a scenario we can count on going forward, as the Chinese want to show the IMF that the currency can be stable.

I was directed to a report that was filed on Monday by a JC Collins titled: When Will China End The Dollar Peg? And it appeared on the website: www.thedailycoin.org   And while technically, it’s not correct, the renminbi / yuan is not pegged directly to the dollar, but instead to a basket of currencies of which the dollar is a part of, the thought here is about dropping the peg to the basket, although the writer refers to the basket as the “dollar” throughout the article.

And in the article was something that I had not thought of. So, let me set this up for you. I’ve told you for over a month now that China was going to make a presentation to the IMF to get the renminbi / yuan included in the Special Drawing Rights (SDRs ) that the IMF uses, that includes: dollars, euro, yen and pounds. I’ve already talked about how at this presentation the Chinese might actually disclose the true balance of their Gold reserves. But in addition to that. I was not aware that the IMF is not going to allow the renminbi to be included in SDRs if it is still pegged to the basket of currencies. So, we could actually see the renminbi float by the end of next month!

WOW! And all those naysayers out there said it would never be done! Well, if this is all on the up and up, we could well see the managed currency peg dropped, and the renminbi float. Of course that would be a managed float, the Peoples Bank of China (PBOC) would still have a lot of say in the direction of the currency, but the currency could trade outside of the current bands it is required to stay within. That would inject volatility into the currency, something we’ve never really seen, although the PBOC attempted to make the renminbi more volatile last year.

Just another step, although this would be a tall step and not the baby steps the Chinese have been taking since 2008 to remove the dollar as the reserve currency, and push their currency as the replacement to the dollar. Are you ready? This is going to get really exciting.. And it’s moving faster than I imagined.

Gold added to its gains from the previous day yesterday, but is down $6 this morning but still above $1,200. Our metals guru, Tim Smith, sent me a link to an article on the web that explains the $22 gain in Gold on Monday. I have it here in case you want to read the whole article. http://www.cnbc.com/id/102623775

But basically, the article says the move was caused by intrigue surrounding a deal between Venezuela and Citigroup to swap $1 Billion in cash for part of the country’s Gold reserves.

You know what I say to that? I say. That’s why you have Gold! As insurance! And Venezuela , seeing their revenues falling from the Oil price shock this past year, needed some cash, so they tapped their insurance.

As I told you yesterday morning, there wasn’t much data to sift through on our Tom Terrific Tuesday, but there were two data prints to look at, and so let’s go look at them! First up was Consumer Confidence, and here the markets received a mild shock from the print, as The Consumer Confidence Index fell 6.2 points to 95.2 in April. Not that this data is at the top of everyone’s list of data the moves markets, it didn’t help the dollar any, as the green/peachback was already doing the rope-a-dope. Next up was the S&P/ CaseShiller Home Price Index for February and here this data showed us that home prices in their 20-city home price index, rose 4.22% in February from January, and that the Home Prices rose at a faster pace. Notice we didn’t hear anyone pull out the “bad weather” card here? So, Home Prices are going up. good for them!

Today’s U.S. Cupboard is going to give us the first print of 1st QTR GDP. Which I’ve already told you will be 1% after all revisions. Well, that’s what I think, I can’t say that it will be 1% for certain, but at this point, I’m thinking that 1% might be conservative! And then of course the FOMC meeting this afternoon will break up after two days of “meetings”. I truly think that IF the Fed members are truly honest with themselves, they’ll admit that the economy is having problems, and this is not the time for a rate hike.

To recap. Today, it will be all about the end of the FOMC Meeting, and what Janet Yellen is going to say afterward. The currencies had their way with the dollar yesterday, and today we’re seeing some profit taking in a few currencies that have run far and fast. And then there are those that are adding to their gains, like the pound and euro. Swedish krona is the best performer overnight on the news that the Riksbank left rates unchanged, when everyone thought they would dig their negative rates hole deeper. And it is being reported that Venezuela has to tap their insurance (Gold) to replace lost revenue from the oil price shock.

For What it’s Worth. The Big Boss, Frank Trotter, will from time to time send me links to articles on the German News site: Spiegel Online. And so I decided to go there myself yesterday, and when I did I found something that caught my eye, for I had seen this somewhere before, and then it hit me, that Ed Steer had highlighted the article in his letter! Great minds must think alike, eh? HA! So, anyway, here’s a snippet or two from the article that can be read top to bottom by clicking here: http://www.spiegel.de/international/europe/greek-president-pavlopoulos-rules-out-possibility-of-euro-exit-a-1030809.html

Greek President Promises Repayment Of All Debt. That’s the title of the article, and here are your snippets. “Time is running out for Greece and its international creditors. If an agreement isn’t found by June, the country will face insolvency. The new Greek president, Prokopis Pavlopoulos, has now told SPIEGEL ONLINE his views on the conflict: He rules out the possibility of a Grexit and promises that all the loans made to Greece will be paid back, but he is also critical of past austerity programs.

“Some of the measures imposed on us go beyond E.U. law,” Pavlopoulos said to SPIEGEL ONLINE at his official residence in Athens. “We want to be equal members of Europe.”

Among other things, the law professor feels that international lenders’ criticisms of the minimum wage and other labor rights in his country are problematic. Pavlopoulos pointed out that in Germany, too, there is a minimum standard of living. “We are not asking for anything more than for the Greek people to enjoy what Germany’s Constitutional Court considers as an established social right for the German people,” Pavlopoulos said. He also claimed that parts of the austerity programs “were not at all growth friendly, but rather would lead the Greek economy to a recessionary course.”

Chuck again. You begin to feel bad for the guy right? Well, don’t! This is what happens when you live beyond your means for years. It happens to individuals, families, cities, states, and Governments. And the realization is hell.

Before I go to the Big Finish I wanted to apologize for a couple of things. 1. For not having a FWIW section the last two days. I just couldn’t find anything worth talking about. and 2. For my math lately. The other day I said El Salvador received millions when it should have said billions for their Gold sales. I think I did that last week too with mixing millions for billions or vice versa. I don’t do any of that on purpose to make sure you’re checking me, I’m not that smart!

Currencies today 4/29/15. American Style: A$ .7990, kiwi .7695, C$ .8295, euro 1.0995, sterling 1.5365, Swiss $1.0470, . European Style: rand 11.8665, krone 7.6245, SEK 8.4050, forint 274.65, zloty 3.6485, koruna 24.9325, RUB 51.51, yen 119.25, sing 1.3225, HKD 7.7505, INR 63.32, China 6.1169, pesos 15.27, BRL 2.9360, Dollar Index 95.97, Oil $56.73, 10-year 2.00%, Silver 16.48, Platinum $1,155.13, Palladium $776.32, and Gold. $1,207.41

That’s it for today. Well, my beloved Cardinals broke out the bats last night, which was a good thing because the other team was hitting the ball too! Well, this is day 5 of my latest home alone arrangement, and all’s well, other than this darn cold, that keeps waking me up at night. I did get a visitor last evening, my good friend Duane stopped by to see how I was doing, and then neighbor Paul came over and before long we were sitting outside talking trees, owls, hawks, and listening to the Cardinals on the radio. I knew it wouldn’t last long once the sun went down, so I didn’t fire up the outside TV, just opted for the old reliable radio. Old school. Chuck, Rick, Duane, Paul and Kevin, sitting out back listening to the game on the little transistor radio I had. Good memories. On this day in 1945. The German Army in Italy surrenders unconditionally to the Allied Troops. So there you go! And on this day, the World War II monument opened in Washington D.C. So, there’s a little history for you today, this April 29th.. Ok, time to get out of your hair for today, so please go out and have a Wonderful Wednesday!

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