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Mnuchin. What’s It Gonna Be Boy?

* Currencies & metals rally .
* Oil bumps higher .
* Eurozone PMIs are steady Eddie.
* Xi to be defender of Global Trade? .

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

Good Day. And a Tom Terrific Tuesday to you! Yesterday morning I told you that damaging storms had moved through the area here in the early morning hours (3-4am) and once the sun rose, and everyone could see what the storm had done, it was scary. There’s a mobile Home Park a couple of miles from here, where the older couple that sits behind me at Roger Dean Stadium, live, and that Park had 50 mobile homes damaged. I hope Bob and Joann are OK. I have no way to contacting them though to check on them. UGH! Yesterday, my good friend, Duane, had to have some major surgery. Last I heard he was doing fine. That was great to hear! The Allman Brothers greet me this morning with their song: Jessica.

Well, did you hear what Steve Mnuchin, the Treasury Sec. nominee, said yesterday? Well, first of all 5 days ago, he talked about how he truly believed in a “strong dollar policy”. and then 5 days later he said that, “the excessively strong dollar may be negative in the short term”. Hmmm. What’s it gonna be boy? I’m doing my very best Meatloaf! But seriously. Do you think that his boss took him aside, and said, “cool it with the strong dollar policy talk?” Because we’re not going to get any narrowing of the Trade Deficit with the dollar so strong. And President Trump has made narrowing of the Trade Deficit a major policy goal.

So, the currencies, which were already on the rally tracks yesterday, firmly rolled on down the tracks. The first currency to really move on the Mnuchin news was the Japanese yen. Once again defying gravity, the yen rallied VS the dollar. But it wasn’t too much longer that the euro, Aussie dollar (A$), kiwi, and a whole host of other currencies all pushed higher VS the dollar. The Chinese renminbi was allowed to appreciate a tiny amount, but keeping the run of consecutive days of appreciation going.

Well, we did need something to push things along yesterday, as I told you there were no data releases to print, and everyone was just looking at each other waiting for someone to make a move. Thanks to the Treasury Sec. nominee for his comments to get things going! I did see that President Trump signed an executive order to halt the hiring of Federal works, which is a start. The initial report also said that he froze Federal Workers’ salaries, but that was incorrect.. The President also withdrew the U.S. from the TPP (Trans-Pacific Partnership). This agreement had not been ratified by congress yet, so by doing this, there will be no effect on U.S. Trade.

However, it does give an indication to the markets (they feel) that a protectionist outlook is in store for the U.S. and if I’ve told you once in 25 years, I’ve told you 100 times, that Protectionist countries find that the markets don’t appreciate it, and the currency of the country gets whacked. I told you yesterday that the Dollar Index was nearing 100, well, overnight, the index dropped below 100, albeit briefly, before scrambling to push back above the figure. I read this morning that the Dollar Index has now retraced 61.8% of the Trump rally (after the election) and is now trading at a 6-week low.

Every day is a new day with regards to what will be said to move the markets. I really don’t like trading this way even when it moves things in the direction they should be moving. If you read the piece I had in the Pfennig yesterday by Richard Russell, you would have found him to be in tune with me on the thought that Trends are the thing, and fundamentals drive trends, and charts and technicals just tell you what’s happened inside the trend. So, the real question is this. “Can words, drive the dollar to a weak trend and end the strong dollar trend?” We’ve never really been here before, so there’s a real question there. You see, fundamentals have always ruled the roost when it comes to deciding whether an asset is in a strong or weak trend.

No, wait Chuck! We have seen this before but only going the opposite way! 1995, and Robert Rubin’s “a strong dollar is in the best interest of the U.S.” brought about a change in direction for the dollar which had been in a weak trend since 1985 (after the Plaza Accord). I can’t believe I almost forgot about Robert Rubin, of whom I cursed and threw darts at pictures of him daily, back in 1995, because I just didn’t understand how “words” could open the door to a new trend. I still don’t, but that’s just me, and my education in the markets regarding trends and fundamentals.

Alrighty then, so much for the history lesson, eh? Well, Gold also took advantage of the weakness in the Dollar Index and the Mnuchin words, and gained $7.50 on the day. I’ve said this before, so it will sound familiar, but I like it when Gold (& Silver) put together a string of gains that fly under the radar. In other words, small gains that add up over time, and then viola! We have a precious metals rally!

And the price of Oil has bumped higher in the last 24 hours to trade with a $53 handle this morning. As I said yesterday, the news from the OPEC meeting from last weekend was good, and the production cuts are holding steady Eddie. Again, though, it is only 3-weeks’ worth of cuts. The Petrol Currencies are on the rally tracks, but not firmly, as this move to $53, looks familiar. Yes, it was just last week that we saw the week begin with a weak Oil price, then rally a few dollars in the next few days, only to end the week weaker again. I think the Petrol Currencies Traders are wanting to make sure they don’t get all lathered up over this bump up to $53, in case this is just a rinse and repeat from last week’s price action.

I tend to think that it won’t be, given that last week there was the OPEC meeting hanging over the price of Oil like the Sword of Damocles, and this week there is nothing to scare Oil Traders from pushing the envelope with the price of Oil.

Speaking of Petrol Currencies, the Canadian dollar / loonie is on the road to recovery from the whacking it took last week after Bank of Canada (BOC) Gov. Poloz hung the loonie out on a line. I shake my head in disgust at Central Bankers that throw their respective currency under a bus, all in the name of export growth.

That’s what’s happening here in the U.S. Or, better said, It’s what I think is going to happen here in the U.S. and that we’ve already seen signs of this happening. The thing that I think U.S. leaders always seem to forget about U.S. exports is that “it’s not just the price (dollar value) that makes U.S. exports expensive, U.S. wages are the BIG Kahuna, when it comes to export prices of goods and services” Germany is an exception to the thought that you need moderate wages, and a cheap currency to rule exports. I bet you can tell me why, Germany, is the exception to the rule, can’t you? I knew you could! Quality of their exports! People will pay for quality, always have, always will..

The U.K. High Court, issued a decree this morning that the U.K. Parliament will vote on the Article 50 before it is triggered. I told you all last year that before this is all said and done, the U.K. Parliament would vote on it and here we are! Just goes to show you that even a blind squirrel can find an acorn! HA! And for those of you at home that have forgotten what the Article 50 is, it is the actual document that will set the U.K. free from European Union rule. And PM May was expected to be ready to file it in March. But now it will have to be voted on by the Parliament. This train to leave the EU has left the station, so there’s no stopping it now, and if the High Court thought that Parliament could hold it all up, they should have made a ruling on it back last fall!

The U.S. Data Cupboard is still lacking today, but will have Existing Home Sales for December, and they are expected to decline. Other than that, not much going on data wise around the world. In the Eurozone, they will receive their Flash PMI’s (manufacturing Index). No wait! They just printed, give me a minute to review them and I’ll be right back! …… OK, I’m back! (did you miss me? HA!) Well, looky there, the Eurozone Flash PMI’s slipped a little bit last month to 54.8 from 54.9, so no biggie, and still strong. Their Composite PMI, which is combination of manufacturing and services beat the previous month’s 54.4 print with a print of 54.5, again no biggie on the increase.. the euro barely moved or even acknowledged the PMI’s, so we’ll just move along too..

So, there you go! That’s today in a nutshell! I’ve been looking for stuff to write about, but on days like this they are far and few in between! So, I’ll keep looking and come back to you in a few. Cue the final Jeopardy them music.

I did come across an article that appeared in the Guardian online that talked about how Chinese President Xi Jinping (Xi) has taken the reins of Global trade and wants to be “the guy” that defends globalist trading. Presidents: Kennedy, Bush and Clinton, all held that title during their terms. But Xi stood before the attendees of the Davos Conference last week and told them that Globalist trading needs to be strong. I find this interesting in that Xi obviously comes from a Communist Country, but at the same time, is touting and promoting Global trade.. While here in the U.S. it is widely thought that we will be implementing protectionist measures that hurt Global Trade. I thought this was a good article, and should you want to read the entire article click here;

Well, I told you above that Gold gained $7.50 yesterday, and appears to be flat this morning so far. I received my most recent letter from the World Gold Council (WGC) yesterday, and my most recent Things That Make You Go Hmmmm on Sunday night, so I’ve got some major reading to do, but first, the WGC report on Gold. This month’s report, highlights India, and their affinity for Gold. here’s a snippet from the WGC report: “India has a young population with a strong affinity with gold: Over 45% of India’s population is under the age of 25. And young people think about the world differently from previous generation. But our large-scale consumer research indicates that they do have a strong affinity with gold: when we asked the question what you would buy if you were given Rs50,000, a third of respondents aged between 18-33 said they would invest in gold.” (Rs = rupees)

So, physical Gold buying in India should continue going forward, and that’s important, because the paper trades will only get wiped out when physical Gold buying overwhelms the paper trades. Have I told you lately how much I dislike paper trades in Gold or Silver? I thought I had!

To recap. The dollar was already getting sold, when Treasury Sec. nominee, Mnuchin really got things heated when he said that the excessively strong dollar may be negative for the short period. The Dollar Index briefly fell below 100, but appears it will revisit that fall below 100 again soon. Gold gained $7.50 on the day, and the price of Oil bumped higher to a $53 handle. Eurozone Flash PMI’s were steady Eddie this morning, and the euro has remained the same, steady Eddie. Chuck thinks the Petrol Currencies Traders are making certain that the price of Oil doesn’t repeat last week’s trading pattern before marking up the Petrol Currencies as the price of Oil rises. And the U.K. High Court says that the U.K. Parliament must vote on the Article 50 process. I told you so, I told you so, I told you so! HA!

For What It’s Worth. Well, I found this and thought, it plays nicely in the sand with my thought that we could very well be seeing the end of the strong dollar trend. It’s on the CNBC site, and can be found here:

Or, here’s your snippet: “There is a fundamental case for the dollar to fall further from here, Unicredit’s chief currency strategist told CNBC’s Squawk Box on Tuesday.

The U.S. currency is hovering around a six-week low after comments leaked on Monday from U.S. Treasury Secretary nominee Steve Mnuchin regarding potential short-term hits to the country’s economy from an “excessively strong dollar.”

These remarks are just one factor to suggest the dollar is set to lose further ground in coming months, according to Vasileios Gkionakis, head of global FX strategy at Unicredit.

“I think it is quite overvalued relative to where real rate differentials were suggesting it would go,” Gkionakis said, adding that the dollar’s 30 percent appreciation between the summer of 2014 to the end of 2016 demonstrated that there is already a lot of optimism priced in.”

Chuck again. A good piece to read for sure, especially if you are serious about getting into currencies again, but are not sure about the timing. It’s all about trends folks. and if the trend shifts to a weak dollar trend, now would be the time to look to invest, not after everyone including the taxi driver, who asks you if you own currencies when you climb in his cab, has already bought. or at a cocktail party, when a guest says, “I own A$’s and loonies, what do you own?” it’s not a good time to buy then. prices have already moved enough to make these two examples aware of what they needed to do.

Currencies today 1/24/17. American Style: A$ .7562, kiwi .7223, C$ .7535, euro 1.0740, sterling 1.2450, Swiss .9996 (nearing parity again!). European Style: rand 13.4382, krone 8.35, SEK 8.8259, forint 288.57, zloty 4.0696, koruna 25.1615, RUB 59.59, yen 113.28. sing 1.4193, HKD 7.7567, INR 68.12, China 6.8635, peso 21.38, BRL 3.1660, Dollar Index 100.28, Oil $53.17, 10-year 2.42%, Silver $17.20, Platinum $985, Palladium $781, Gold $1,217.70, and SGE Gold $1,227.97 (it did change!)

That’s it for today. Boy oh boy did we have a some storm damage around us here. The main road that I take to Roger Dean Stadium was closed all day! But the sun came out, it warmed up, and I hunkered down here and did some reading. That was sad new the other day that two more baseball players died in the Dominican Republic in car accidents. The Cardinals lost a young talented player (Taveras) the same way a couple of years ago. This time it was Ventura of the Royals, and Infante of the Indians (retired). ? I saw my oncologist last Friday, and she’s not happy that I’m still on steroids (neither am I!) and is looking for something that could help me and get me off the steroids! I’m all for that! Like I said, these steroids have me as big as the Staypuff Marshmallow Man, and feeling so “out of it”.. And the back pain is so severe, I’m ready to try anything! The last time I had back pain like this, I was taking pain killers, anti-inflammatories, and muscle relaxers, that led to back surgery in 1991.. Oh well, life goes on, and it’s time to get this out the door. I know one thing.. I’m ready for the strong dollar trend to end, how about you? The 70’s band, Gallery, takes us to the finish line today with their song: I Believe in Music. I believe in music, I believe in love. And with that, I hope you have a Tom Terrific Tuesday! And. Be Good To Yourself!

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

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