More Signs The Dollar Is Weakening…

Good day… And a Tub Thumpin’ Thursday to you! I’m going to leave the Tub Thumpin’ to you today, as I’m having infusion confusion this morning. Hopefully by noon, it wears off, but right now, my head feels like it weighs 50 lbs. and is full of fog… But that won’t stop me, no sirree Bob! The FOMC Meeting Minutes were what I expected them to be, and we’ve got a couple of doves flying today… This and more for this Tub Thumpin’ Thursday for you today! The Allman Brothers greet me this morning with their song: Dreams… Which I can sheepishly say that I was having some strange ones last night!

Well, the currencies fought back against the dollar’s attempted move higher yesterday, and by the end of the day, things were as they were the previous day… The euro was trading over 1.12, the Aussie dollar (A$) was back to 75-cents, Gold headed back toward $1,260, and the 10-year Treasury yield dropped back to 2.25%… And what was the cause of this turnaround Wednesday? The Fed’s FOMC Meeting Minutes… Once again they proved to be disappointing to the markets. Instead of giving the markets clues on “how” their balance sheet would be unwound, they instead gave them the “when”, but even the “when” was a little sketchy, but the markets seem to have figured out that the Fed will tell them all they need to know at the June meeting…

Hmmm, of course had the markets just listened to me they would have been able to go about their business today without stopping everything to hear what the Fed has to say in their minutes… For I said, right here in this letter, that the Fed would wait until June when they hiked rates again, to give any clues on their unwinding of the economy an opportunity to sneak through the alley with Sally. Really to diffuse the effects of the unwinding…. Right now, it looks like, to me that is, that the Fed will give the skinny on the “Great Unwind” or GW, in June, and defer the start of the unwinding until Sept or October.. Even though the Fed continues, as a group that is, to believe that the slowdown in the first quarter was just “transitory”, they want to wait-n-see before they commit to the GW!

So… there you have it! All wrapped up in a nutshell, what happened, and why, and what I think about it! What else do you need to start your day? Have a Great day…

Gotcha! Hey! even in my fogged brain status, I can have some fun! Well, overnight, the euro held its gains above 1.12, but the A$ fell back below 75-cents once again, as the fallout of the Moodys ratings cut of China’s debt came back to haunt the A$… The euro-lites of Norway and Sweden are seeing their respective currencies (krone and krona) on the rally tracks, with the Norwegian krone leading the way, as the krone is in a good situation right now, that I explained the other day, regarding how the krone was getting love from the its status as a Petrol Currency, and in addition, the love is coming from being a euro-lite, with the euro on the rally tracks..

I don’t know if you noticed yesterday or not, but in the currency roundup, the S. African rand had moved below the 13 handle… And it moved further into the 12 handle yesterday and last night… The rand is a European Priced currency, which means as the number goes down, the more value to returns VS the dollar, as it takes less of the currency to equal a dollar. I’ve always said that the rand was too volatile for my blood, and that I wouldn’t touch it with “your ten foot pole”. But, I would always say that when the rand was good it was very good, and when it was bad it was very bad… And for the longest time now, the rand has NOT been very good… But I feel a rallying rand is an indication that the dollar is weakening, for if the rand is allowed to rally VS the dollar, then the dollar is weaker! Gov’t corruption, strikes, and interest rates that should be higher to attract foreign investment, have been the bugaboos for the rand, but as I said, if the rand is allowed to rally VS the dollar, as it is right now, then it could be a very good indicator that the dollar is weakening…

And there has been some confusion lately relating to the two pricing conventions used in currencies… The American Style: is simply as the price goes up, the value is increased… the euro, the A$, kiwi, and sterling are the main American Style priced currencies. For readers who requested it many years ago, I also convert the loonie and franc to American priced currencies.. But if you called the trade desk they would quote you in European Style for these two currencies.

European priced currencies take in all the other currencies… So, don’t be confused!

The Bank of Canada (BOC) met yesterday, as scheduled, and as I thought, they left rates unchanged at 0.50%… I’ve said this before, and I’ll say it again, Canada has a housing bubble in Toronto and Vancouver, they are in dire need of rate hikes to stop the bubbles from growing larger. But the Gov. of the BOC , Poloz, is not going to hike rates until he absolutely needs to, because he’s a “trade guy”, and “trade guys” always want a cheaper currency to facilitate, trade… And rate hikes would not give him a “cheaper currency”… I’ve always like Canada because of the stable banking system, plethora of raw materials that other countries will always want, and a steady Gov’t… There are some cracks in the Gov’t’s foundation right now, and the BOC is losing their grip on the economy… I’m so ticked that this has been allowed to go on in Canada this long! The Canadian dollar/ loonie though is resilient, and because of those raw materials it is underpinned, as long as the raw materials are priced right!

The OPEC meeting and NON-OPEC Oil Producing countries, meetings begin today in Vienna, Austria.. I’ve already told you a couple of times now that these meetings could very well, show the unification of extending the Oil production cuts, and in addition, I wouldn’t be surprised to see additional cuts announced! If that would happen, the price of Oil would be underpinned for sure, at least short-term… And with a stronger Oil Price, the Petrol Currencies should really be receiving some love!

I’m sitting here this morning thinking that Gold Traders read the Pfennig yesterday, and decided to listen to me, and began to mark up the Gold price… (Hey! don’t laugh! It could happen, right? Oh, come on Chuck, if that happened, you wouldn’t be sitting here in your basement at 0-dark 30 writing the Pfennig. Instead you would be celebrated as the sage of the Mississippi!) So, back on earth and reality, Gold added $7.90 yesterday, to close at $1,258.60, and is up another $3.90 in the early morning trading today!

Hey! remember when I featured a FWIW section story about how Arizona lawmakers had sent a bill to the Gov. for signing, that would eliminate the capital gains tax on Gold & Silver that was bought at the mint… Remember the reasoning? It was the same as exchanging one nickel and two dimes for a quarter! Well, bust my buttons! The Arizona Gov. signed the bill and it’s now a law in Arizona! WOW! Now, if we can get other states to follow, eh? Talk about a way to get physical Gold & Silver to overtake the paper trades! Think about that for a minute… Municipal Bonds are usually exempt of taxes in the state it’s issued in, and some even have Federal tax exemptions. And they’ve always been popular… But if Gold & Silver doesn’t have capital gains taxes they could become as popular with the moms and pops I’m just saying…

The price of Oil slipped back below $51 in the past 24 hours, but only to $50.95, so still trading within’ spittin’ distance of $51… So much weight has been put on the Oil meetings today, that the risk here is that they disappoint, and that would spring the trap door on the price of Oil… Just something to think about, given the history of the OPEC meetings, a disappointing meeting is not out of the question! But, I’m betting a Krispy Kreme to a dollar that the Oil producing countries don’t disappoint today…

The U.S. Data Cupboard today has only the Trade Balance (read deficit) for April today. The usual Tub Thumpin’ Thursday fare of the Weekly Initial Jobless Claims is always there on Thursdays, so that too will print, but the more important print is the Trade Balance.. The dollar was a bit weaker in April, and so I think we’ll see the Trade Deficit back off the $64.8 Billion print from March…

Yesterday’s Data Cupboard had the April Existing Home Sales in addition to the FOMC Meeting Minutes, and like I said yesterday would happen, Existing Home Sales dropped from 5.7 Million per year, to 5.6 Million per year… So, we saw both New Home Sales and Existing Home Sales drop in April… Hmmm, isn’t springtime one of the best times to be home shopping? I’m just throwing that out there..

Well, I’ve beaten around the bush enough the last two days regarding the Trump Budget, so I might as well bite the bullet and get to talking about it… So, here goes my attempt to make some sense from it…

Well, the Trump Budget was presented to the masses on Tuesday… I was shocked to see actual cuts to spending programs, and he says that if we stay the course with his cuts, that the U.S. would have a balanced budget by 2027… It’s been a long time since the Republican Party could even get those words out of their collective mouths… However, by the time the lawmakers on both sides of the aisle get their hands on this, the final Budget won’t look anything like the one Trump presented to them on Tuesday… I find this process to be good, but the results awful…

One thing in the budget that I did have to laugh about, well, I guess it wasn’t funny ha-ha, but , well, I’ll let you decide… The Budget makes the assumption that the U.S. economy will grow at 3% per year for the next 10 years… Hmmm… Does he know that the U.S. hasn’t achieved 3% annual growth since 2005? And that this assumption of growth would mean that the U.S. economy expanded for 222 months, consecutively… Economist are saying that this current expansion, what little this is, has become long in the tooth (since 2009)… So, I found this “assumption” to be a bit funny, in that it’s never going to happen!

The markets have shrugged off the Budget, because they know that it will come out of the lawmakers’ gauntlet with a completely different look… So, why react now, when the final product will determine their reaction? Remember the games the lawmakers tried to play a few years ago, when we had a debt ceiling debacle here in the U.S. and they came up with a plan to “cut spending over 10 years, of planned increases?” So, they planned to spend money in the future, but then decided to not spend it, or at least so much, and they call that a “cut in spending” I shake my head in disgust.. .

To recap… The FOMC Meeting Minutes were disappointing to the markets yesterday, and the dollar’s rally was cut off at the knees. From there, the currencies and metals took over and have held the conn through the overnight and morning sessions… Gold regained its mojo and rallied yesterday, and again so far this morning. The BOC left rates unchanged, which was no surprise to Chuck, who bangs on BOC Gov. Poloz, and points out the resiliency of the loonie, given all the hits that Canada is taking on these days. Chuck also points to the S. African rand as a good indicator that the dollar is getting weaker, as the rand has been allowed to rally…

For What It’s Worth… Thanks to Ed Steer who highlighted this article on Barrons in his daily letter this morning (www.edsteergoldandsilver.com ) And it’s about the Markit PMI reports yesterday that I’ve explained the markets don’t pay too much attention to, but maybe they should? You can read the article here: http://www.barrons.com/articles/markits-u-s-flash-pmi-still-looks-somewhat-underwhelming-1495549467?utm_medium=email&sslid=M7G0NDc0NDMxNzexAAA&sseid=MzM1NDAwsDA2AwA&jobid=238a56db-d950-4376-aa94-037384c6d5bb

Or, here’s your snippet: “Growth of US business activity gained a little momentum for a second successive month in May, but the upturn still looks somewhat underwhelming…

May saw an encouraging upturn in service sector growth to the fastest so far this year, buoyed by rising domestic demand. Manufacturers, on the other hand, reported the smallest rise in production since last September amid lackluster export sales.

Peter Boockvar of The Lindsey Group had this to say…

We will certainly see a Q2 economic rebound with only the degree in question. The Atlanta Fed estimate has a 4 handle which if the case would lead to around a 2.5% first half run rate if Q1 is revised up to .9% as expected. Historically though according to Markit, a 53.9 composite index in their model equates to a 1.5% annualized rate of growth.”

Chuck again… this crack in the armor of U.S. Manufacturing comes at an interesting time, given all the disappointing data… And like I said, maybe the markets should be paying more attention to this data…

Currencies today 5/25/17… American Style: A$ .7470, kiwi .7023, C$ .7440, euro 1.1220, sterling 1.2063, Swiss $ .9729, … European Style: rand 12.88, krone 8.385, SEK 8.6749, forint 274.50, zloty 3.7258, koruna 23.5620, RUB 56.35, yen 111.90, sing 1.3849, HKD 7.7915, INR 64.58, China 6.8903, peso 18.41, BRL 3.2677, Dollar Index 97.15, Oil $50.95, 10-year 2.26%, Silver $17.15, Platinum $947.40, Palladium $765.82, Gold, $1,259.50, and SGE Gold… $ 1,256.93

That’s it for today… Well, my beloved Cardinals saw their bats arrive from St. Louis, and they hit the ball last night, winning in L.A. Good pitching will beat good hitting, that’s an old adage my dad taught me about the game years ago… I remember telling him that if that’s the case, then it’s better to have a good pitching and hitting team! He called me a genius, which at the time I thought was a compliment… HA! Stopped by the office yesterday afternoon after my infusion and lunch with Frank. It was great to see a couple of the people there. I really wanted to just get in and out without anyone seeing me, as I was not presentable, given my 3 hour adventure at the infusion center! Well, I need to get this out of here, so I can get the response, and then send it off to you. Then I can go back to sleep! But not too long, as I have a visit with the heart doc this morning! Steely Dan takes us to the finish line today with their song Kid Charlemagne… And with that, I’ll send you on your way to having a Tub Thumpin’ Thursday! Do some Tub Tumpin’ for me, will you? And Be Good To Yourself!

Chuck Butler
Managing Director
EverBank Global Markets
Creator / Editor of: A Pfennig For Your Thoughts
1-800-926-4922

http://www.everbank.com

The post More Signs The Dollar Is Weakening… appeared first on Daily Pfennig.

Powered by WPeMatico