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Mnuchin Needs To Get The Memo!

* Dollar selling is stronger this morning..
* Trump helps weaken the dollar.
* Mnuchin sends Gold higher!
* All aboard the rally train today.. ..

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

Good Day. And a Happy Friday to one and all! Well, I’m getting started on the letter quite early today. Can you say 2 am? I woke up, couldn’t go back to sleep, and thought, shoot Rudy, I might as well get started. If I get sleepy during the letter writing, I can always stop, and go back to sleep until the alarm goes off, right? So, here I am. to rock you like a hurricane! Well, more like a gentle shower.. Neil Young greets me this morning with his song: Harvest, from the album of the same name.. Did you know that Neil got his start with the band: Buffalo Springfield? Free Pfennigs for anyone that can name the other members of Buffalo Springfield.. It’s a rock-n-roll hall of fame list of names, I’ll tell you that!

And no Googling it! Well, after the dollar had the conn on Tuesday, we’ve seen the dollar softer each morning on Wednesday and Thursday.. And today? Well, the dollar is getting sold at a stronger pace. Not like funnel cakes at a state fair, but a stronger pace than on Wednesday and Thursday.. What has the dollar bugs on the run this morning? Well, jawboning by the President.. Once again, the President, ventured into the currency arena, where most Presidents have avoided, and in a candid conversation with Caterpillar’s chairman, said, “when the dollar rises, and we let other people manipulate their currencies, that’s the one thing that stops you.” I found this here if you want to read the whole article:

So, the currency traders have taken that comment by President Trump, as him saying that he wants a weaker dollar, and so they are giving him what he wants, but at this point, this dollar selling would have to pick up the pace, or, go on a multi-day selloff to really gain some traction for a weaker dollar. Right now, the moves are “nice” in the currencies, but not indicative of a major dollar selloff at this time. Oh, and I also found it interesting that the currency traders chose the Trump jawboning over the comment by Treasury Secretary, Mnuchin, who has the title of the person that normally makes the comments in the currency arena, when he said, that “as strong dollar is a good thing”.. OOOPS did he not clear that with the Prez, before saying it, because it’s 180 degrees away from what the Prez was talking about!

And just hours after the Trump jawboning, the Chinese made a statement of their own.. this is found on Reuters: And basically says that China issued a statement following the Trump statement that they (China) have no intention of using currency devaluation to its advantage in trade. The went on to say that they hoped the U.S. could fully and correctly view the exchange rate issue. Hmm.. reminds me of the old SNL skit, Point and Counter Point..

Speaking of Mnuchin, he really had the markets all lathered up with no place to go, when he decided that it was a good time to talk about something that he’s thinking about. Saying that he’s not making any formal announcement, he said that his staff has begun to look into issuing U.S. Gov’t Bonds (Treasuries) with maturities of 50 and 100 years.. WOW! Talk about a historic shift in policy! Oh, gee now we can join the ranks of countries that have issued 100 year Gov’t bonds that includes: Belgium, Mexico and Australia..

Maybe someone should get the memo regarding Global Central Banks selling Treasuries to Mnuchin before he goes too far down the 50 & 100 year maturity issuance road. In my December Review & Focus, I really spent a lot of time showing the amounts of Treasuries being sold by Saudi Arabia, China and Russia. Actually, Russia, at that time, wasn’t selling Treasuries, they just weren’t reinvesting in Treasuries at maturity, which is the same as selling if you ask me! Yesterday, the Daily Reckoning, , had a graph illustrating the Net Transactions of U.S. Treasury Bond and Notes by Foreign Official Institutions.. And about mid-2016, the graph shows a these transactions going negative, and by year-end the drive downward was really pronounced..

In the DR, they talked about the Cassandras that had talked about how Central Banks would, one day, sell their Treasuries thus causing interest rates to spike, and the dollar to weaken mightily.. They mocked that belief because the Treasury selling is taking place, but rising interest rates and a falling dollar aren’t taking place. If I didn’t know any better, I would say they were making fun of me! For I was one who talked about that scenario. So, go ahead and call me names, I don’t care! I didn’t see you out there making a call like I did!

To be fair to the Treasuries that are getting sold, they are all getting sold for different reasons, of which we’ve gone over here in the past, but I’ll be happy to do it again..

China is selling Treasuries so they have dollars to sell when buying to defend renminbi..

Saudi Arabia is selling Treasuries because they told us they would if we passed that bill that allowed Saudi Arabia to be sued for 9/11 association.. And.. to cover the deficits they’ve incurred from the drop in the price of Oil. And Russia is not reinvesting so they have dollars to buy Gold. In fact the other, smaller Central Banks around the world that have been selling Treasuries are just doing so to buy Gold and other currencies, diversifying their investment portfolios!

According to Bloomberg.. The Central Bank selling of Treasuries has been offset by “private investors”. Really? Come on, you’re pulling my leg, Bloomberg, aren’t you? I guess not! So, private investors have the Benjamins to pull off this offsetting of Central Bank selling? Who would have thunk that one? Not me! In fact I still can’t get my arms around that statement!

Alrighty, I’m not going to spend the middle of the night, to just talk about Treasuries! The Aussie dollar (A$) traded over 77-cents the other night, for a brief time, before profit taking set in. And in the overnight trading the A$ has pushed past 77-cents once again, but this time it looks like it will remain there, at least until the NY boys and girls arrive at their desks. The A$ has opened the door for kiwi too! The New Zealand dollar/ kiwi, has pushed past 72-cents overnight, and looks quite perky. I’ll remind everyone that about 10 days ago, when kiwi was trading at less than .7150, that we had an opportunity to buy at cheaper levels, with the idea that the next move in rates would be up and we didn’t get that opportunity very often, due to the markets running ahead of everyone else. So, I’m just saying..

The price of Oil remains well bid at a price above $54 for the 3rd consecutive day. I was reading a research paper from a trader yesterday, and it is his contention that the price of Oil won’t move significantly higher until the Oil that the Saudi’s sell to Asia goes higher in price. This Oil is called: Arab Light Crude.. and each day it posts an Official Selling Price (OSP). And the research paper tells us to keep an eye on the Arab Light Crude OSP for an indication that the Oil we follow, which is the West Texas Intermediate (WTI).

Gold had a nice day yesterday, rising in price by $12 to close the day at $1,249.30. And the shiny metal is up even more in the early morning trading today, with the last look Gold was trading at $1,255! So, what goosed Gold yesterday? Don’t look now, but it’s that Mnuchin guy again! Yes, after Mnuchin told reporters that the new “Trump administration policies will probably have limited impact in 2017.” So, why would that have any effect on Gold? Ahhh grasshopper, come, sit, and listen. Basically it all comes back to what the markets believe the Fed will do this year, and if Trumps policies have limited impact in 2017, then that means there might not be a need to hike rates beyond the March rate hike. And Gold took off for higher ground, and bonds rallies, with the 10yr Treasury’s yield falling to 2.37%.. (remember bonds price like this: as yield goes down, price goes up, and vice-versa)

The euro has ticket to ride on the rally train today. All aboard! Yes, nice to see you Mr. euro, and you Mr. A$, and Mr. kiwi, how nice to see you Misters loonie, rand, real, peso, krone, sing dollar, and of course not forgetting Mr. pound! All aboard, please take your seats as we’re about to pull away from the station, say your good byes to those cheaper levels! Hopefully you won’t be revisiting them any time soon!

One thing to think about with the euro that’s coming up soon is their bond buying program. Recall that that the European Central Bank (ECB) announced that they would be reducing the amount of bonds they are buying each month by euro 60 Billion per month.. the first month this happens which will be April, the markets are going to finally realize what this is.. Tapering.. And that’s the last thing the ECB wants the markets to believe. The ECB has gone as far as to say outright and loud so everyone can hear them, that this is not Tapering.. but who do they think they’re fooling? Def Leppard has a song titled: Foolin’ F-f-f-foolin’, ah F-f-f-foolin’..

Here’s what I’m thinking regarding the beaten and whipped euro.. The economic reports from the Eurozone have been better, and showing signs of strength, and to me that means that all this accommodation that the ECB has implemented should be looked at as too much now, and the start of removing the accommodation should begin.. And if the ECB begins to sound less dovish at their meetings, the markets might take that, along with the tapering as positive signs for the euro, and the euro could mount a rally.. So, we need to be on the lookout for ECB statements, they will hold the key to any euro rallies that could be had..

Canada will print their January CPI (consumer inflation) this morning.. I was not happy with the December print of CPI which fell to 1.5%, but I think January will make up for that slip in December, with January CPI rising to 1.9%.. Year on year. I don’t think that’s enough to get the Bank of Canada (BOC) to look at getting off the schnide and hiking rates, but at least it will be enough to get a rate hike discussed at the next BOC meeting, I would think! The loonie is on the rally tracks already this morning and a good strong print of CPI should keep the loonie there..

I know, I know it still seems very strange to me when I have to type it out.. That rising inflation would help a currency. It just doesn’t go together, like peanut butter and jelly, but it’s what the markets have brought about and we have to look at this way, or get caught in the rip tide.

The U.S. Data Cupboard today has the New Home Sales data for January, and we’ll also see Consumer Sentiment for Feb.. Both should be dollar positive, but in the realm of 2nd Tier Data that really doesn’t move markets that much. We’ll start next week with a bang on Monday morning, when Durable Goods and Capital Good Orders print for January. Tuesday will bring us the end of the month, and the 1st revision of 4th QTR GDP, and the Trade Deficit.. So, this week was void of much data, but next week looks to be chock-full-o-data, so get ready for that! HA!

To recap.. After two mornings of a soft dollar, the selling of the dollar is stronger this morning, not selling like funnel cakes at a State Fair, but stronger. And that was brought about by jawboning by President Trump, who didn’t outright say he wanted a weaker dollar, but did say he wanted a stronger renminbi! That’s the same thing, just backwards.. Gold had a nice day gaining $12 and is up nicely in the early morning trading, and that came courtesy of Treasury Sec. Mnuchin, who said that the Trump policies would have limited effect in 2016, and that got the markets thinking that the Fed won’t need to hike rates as much, which led to rallies in Gold and Bonds.. And then Chuck gets called a “Cassandra” by the DR.. I don’t think he takes too kindly to that!

For What It’s Worth. Well, the number of articles that are “worthy” just keeps growing smaller and smaller, folks, so, well, one of these days, the well will run dry, and it’s running pretty dry with this article for the FWIW today. it’s about another fine that Deutsche Bank has to pay, and can be found here:

Or, here’s your Snippet: “The giant German lender was hit with about $630 million in penalties on Tuesday over a $10 billion Russian money-laundering scheme that involved its Moscow, New York and London branches.

It follows a $7.2 billion settlement Deutsche Bank reached with the U.S. Department of Justice last month over toxic mortgage assets and the $2.5 billion it agreed to pay in 2015 over interest rate manipulation.

The latest fines penalize Deutsche Bank (DB)’s failure to deal with a stock-trading scheme that enabled some of its clients in Russia to improperly move huge sums of money out of the country and into offshore accounts, according to regulators.

“The bank missed numerous opportunities to detect, investigate and stop the scheme due to extensive compliance failures, allowing the scheme to continue for years,” the New York State Department of Financial Services said in a statement.”

Chuck again.. the hits just keep coming for Deustche Bank , eh? A few months ago, it sure looked like the Big German Bank would have to close their doors, and I wrote about this in the Review & Focus ( But then they negotiated the fine they were paying to the U.S. to a workable number. But this just proves that when something is down, you just keep kicking it!

Currencies today 2/24/17. American Style: A$ .7710, kiwi .7230, C$ .7637, euro 1.0577, sterling 1.2535, Swiss $.9934, .. European Style: rand 12.0560, krone 8.3370, SEK 8.9860, forint 291.76, zloty 4.07, koruna 25.5420, RUB 57.83, yen 112.68, sing 1.4056, HKD 7.7604, INR 66.56, China 6.8734, peso 19.74, BRL 3.0619, Dollar Index 100.91, Oil $54.21, 10yr 2.37%, Silver $18.33, Platinum $1,015.13, Palladium $777.88, Gold $1,255.10, and SGE Gold. $1,248.49

That’s it for today.. the last Friday in February.. And tomorrow will be Mardi Gras, with a HUGE parade in St. Louis.. I have to be serious here for a minute.. I ask you all dear readers that have been so kind to me through the years, and prayed for my health, to once again pray for my sister, Barbara. I told you a couple of years ago, that she was diagnosed with ALS. Well, she’s not doing well, and the ALS has taken over her body. Next Tuesday is her birthday, and I’m not sure she will know it.. UGH! That’s all I ask. OK. I don’t have much else to talk about today, I had better go back to bed, or else I’ll waste the day away sleeping again! Ambrosia takes us to the finish line today, with their song: How Much I Feel.. In the height of the Disco era (UGH) Ambrosia came along with a different sound that wasn’t close to disco, thank goodness! OK, time to get off this bus today, and get going so I can join you all in having a Fantastico Friday! Be Good To Yourself!

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

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