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No Data, 3 Fed Speakers, And Dollar Strength!

* The dollar has the conn this morning..
* A$’s prove resilient though!
* Eurozone Flash Composite PMI beats expectations!
* Singapore’s 2017 Budget: Fair & Balanced!

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

Good Day. And a Tom Terrific Tuesday to you! What a great 3-day weekend, weather wise here in S. Florida! WOW! And I heard that it was quite nice back in St. Louis, so there you have it! I’m sure somewhere in the U.S. got whacked with some winter weather, but so far, in the Midwest, it’s been a cakewalk winter.. Eric Clapton greets me this morning with a song, that the weather personnel down here are probably singing.. Let It Rain.. For we’ve not seen rain in a long time! But that saves me money, for when it rains, my wife goes shopping! UGH!

Yesterday, while the U.S. was out buying mattresses on President’s Day, the currencies and metals just sort of drifted along for there was little to no volume once the boys and girls in London headed to the pubs. Gold did have a run for a brief time, but that was whacked off , and ended up rising only $2.40 and closing at $1,237.00. The shiny metal is down a buck as the cobwebs get wiped away from the trading screens in NYC.. And I’m concerned about when they do come in and see what the dollar has done overnight, that might just spill over to Gold.. UGH!

But this morning is a different bird altogether, and it’s not a pretty bird, or is it singing a pretty song for the currencies. The dollar has the conn once again, and it’s all about interest rates this morning. There’s a chance that this dollar strength could get nipped in the bud today, as there are 3 Fed members on the docket to speak today, and all three would be considered “doves”.. (Kashkari, Harker, and Williams) But at this point I would think that all are on board with a rate hike in March. But there’s always a chance that they break from the ranks and talk dovish, that would certainly stop the dollar’s rally in its tracks.

And we’ll have to depend on the 3 Fed Members to move the markets further because there’s nothing but the Flash PMI due to print this morning, and this is a secondary report that is attempting to measure up to its Big Brother, the ISM (manufacturing index).. In fact, this whole week is void of “real economic data” or even stuff that the media likes to jump all over and drool when a report looks good. New Home Sales on Friday is about as “real economic data” as we get.. The Fed’s last meeting of the FOMC minutes will print tomorrow afternoon, but we all know what they say.. Janet Yellen just told us last week, not once, but twice!

The euro has dropped back below 1.06, and it’s not just dollar strength sending it below the 1.06 figure.. Just when you thought you wouldn’t hear about Greece for a while, the conversation turns to Greece once again. What’s going on here? Poverty in Greece is worse now after 7 years of bailout and billions of euros that poured into Greece.. Only Bulgaria and Romania have worse poverty levels than Greece. Greece was the first Eurozone country to need bailouts, and was followed by Ireland, Portugal and Cyprus, and all three have come out of the depths they were in, paid off their bailouts and their economies are growing again. But not Greece.. Well, I have my opinion on this, and if you want to hear it, I’ll share it with you. If you don’t, then skip ahead.. OK.. ready? Well, in my humble opinion, which could be wrong, it comes down to one word.. Socialism.. It’s never worked, and now it’s not working for Greece.. As Margaret Thatcher once said, “the problem with socialism is that eventually you run out of other people’s money”..

OK, for those of you who skipped ahead, welcome back to the Pfennig.. Well, most of the currencies are getting whacked by the dollar this morning, but there are a couple of currencies holding on, and one of them is the Aussie dollar (A$), which is showing some very strong resiliency to the U.S. dollar strength this morning. And a lot of that resiliency could be traced back to the printing of the latest Reserve Bank of Australia (RBA) meeting minutes last night.. The minutes were upbeat, but not any more than the RBA Gov. Lowe was after the meeting, so there were no surprises, and if I’ve taught you all one thing over the years, it’s that currency traders don’t like surprises or unknowns..

In my attempt to be fair and balanced, I did receive a dealer’s research paper on the A$ last Friday, and in the research their team is calling for a correction in the A$, and their call is that the commodities that I’ve been highlighting as having a Tent Revival, like copper, and iron ore, have seen their rallies back off recently.. So, I read the report and then asked myself, could this “backing off of commodity prices” just be a breather, or is the end of the run, that basically just got started? I guess we’ll have to wait-n-see, eh?

This just came across the screen. Eurozone Flash Composite PMI’s beat expectations! First of all, the Composite report is a combo of the manufacturing sector PMI, and the Services PMI, and this way you get a better picture of the economy in one print. And the “flash” report is like a “first report” and can see changes when the data is confirmed, but for the most part, these “flash” reports are pretty darn near what the final report prints. And for January, the Eurozone Flash Composite PMI printed at 56! The expectations were for a solid 54.3. So, that’s a nice strong print to start 2017 for the Eurozone, folks.. I sure hope European Central Bank (ECB) President, Mario Draghi, takes note of this stronger than the average bear report!

Well, there I was minding my own business, when I came across some data that caught my eye. Did you know that Russia has the lowest national debt in Europe? And that they are on track to pay down the remaining Soviet Union debts by year end? WOW! I could have used this info when I wrote the Currency of the Month, highlighting the Russian ruble a couple of weeks ago! For those of you keeping score at home, Russia’s debt to GDP ratio is 18.3% .. GDP in Russia is $18.96 Trillion. that’s moving up the hit parade quickly folks.. And they’ve been dealing with economic sanctions for 3 years! Imagine there’s no sanctions, it isn’t hard to do, no digging out from sanctions, which would result in a strong economy too..

On a Side Bar.. I used the phrase above, “caught my eye”.. Most of you know that I only have one good eye, the other eye was removed because of a cancerous mass that damaged the optical nerve, and I kissed that eye goodbye. So, when I say “caught my eye” I laugh out loud, and you should too, knowing all too well that I could be actually catching my eye, should I cause it to pop out! So, here’s a real funny story that a dear reader sent me.. A man is eating dinner in a restaurant when he hears a woman’s shriek, and he looks up to see a glass eye ball heading is his direction, and he catches it and wipes it off and gives it back to the woman, who then moves to his table to finish her dinner, and start a conversation. the conversation goes very good, and the next thing you know there are talking about marriage and kids. The guy then stops the conversation to ask, “how is this happening, we just met, and we’re already this far down the line planning out lives together” and she responds. ” I don’t know, but you sure caught my eye”! HAHAHAHAHAHA!

Singapore, one of my fave countries / currencies through the years, printed their 2017 Budget this past weekend, and I have to say this is one of the reasons I favor Singapore over other countries.. Singapore’s 2017 Budget is very fair and balanced, with an upbeat growth outlook, which will allow the Monetary Authority of Singapore (MAS) the ability to maintain their neutral currency band, when they next meet in April.

Well, did you hear this past weekend that President Trump is looking at changing the way we calculate the Trade Deficit? I saw this in the WSJ this past weekend.. The administration is looking at changing the way it calculates the Trade Deficit, and it’s not going to make it look better! Basically, they would look to exclude from U.S. exports any goods first imported by the U.S., like cars, and then transferred to a third country like Canada or Mexico. We didn’t make the item, all we did as transfer the item to another country. But you see what’s going on here don’t you? What did the President tell us in his first week in office? That he was going to narrow the Trade Deficit by a wide margin! So, first you ramp it up to a much larger Trade Deficit, so things look desperate, and then you propose a way to narrow it.. Of course there’s only a couple of ways to do that.. Increase exports, decrease imports. Well, if you want to increase exports, you have to 1. Have qu
ality goods that other countries want, and 2. Have a cheaper currency in the terms of transaction of the trade. So, I’ve said this before, the Trump administration wants a cheaper dollar, but the Fed wants to hike rates to make the dollar stronger. Who’s going to win this battle?

My good friend, the retirementor, Dennis Miller of recently published an article titled: “There’s Going To Be a Showdown”.. And in the letter he talks about this battle that he sees coming between the Fed and the President.. Should be interesting, don’t you think? Dennis is doing everything he can to help retired people and people thinking about retirement! So, check out his website!

Alrighty then, We already went through the gyrations of the Data Cupboard for this week, so no need to go back over that. And I already talked a little about Gold, so I’ll switch over to Silver.. I was reading Ed Steer’s letter this past weekend and he had an piece from Ted Butler (no relation that I know of) the Silver guru. Ted has spent a good portion of his life researching Silver, and the “funny business in Silver”.. But this week, Ted spent most of his article talking about the shortage of Silver, and how that should be a big price bonanza for Silver going forward.. You have to pay for Ed’s letter, but I would think that if you are a Gold / Silver lover, you may want to consider his letter each day..

To recap.. The dollar has the conn this morning, and swung its big bat at the currencies overnight. Gold held strong throughout the night, but Chuck is concerned about when the NY traders come in this morning. Not much in the way of data this week, but we will hear 3 Fed members speak today, all three are considered to be “doves” , and Chuck thinks that there’s a chance that they break from the ranks and talk dovish, and that could stop the dollar’s rally in its tracks, but.. Chuck also doubts that at this point the Fed members wouldn’t want to sing from a different song sheet. Eurozone Composite Flash PMI’s beat expectations and give the Eurozone a strong start to 2017. And Chuck talks about “catching an eye”!

For What it’s Worth. Well, here’s another case of alleged price rigging.. the firms named will face Fines should the charges hold, but no jail time.. I found this on the Bloomberg, so you can read it all here:

Or, here’s your snippet: “South Africa’s antitrust investigators urged that a dozen banks be fined for colluding and manipulating trades in the rand, potentially becoming the latest in a string of penalties handed to lenders around the world for rigging currencies.

The Competition Commission identified lenders including Bank of America Merrill Lynch, HSBC Holdings Plc, BNP Paribas SA, Credit Suisse Group AG, HSBC Holdings Plc, JPMorgan Chase & Co. and Nomura Holdings Inc. as among those that participated in price fixing and market allocation in the trading of foreign currency pairs involving the rand since at least 2007. It referred the case to an antitrust tribunal, concluding an investigation that began in 2015”

Chuck again.. It’s just one after another isn’t it? And each time, billions are paid in fines, but no one is guilty of anything.. I shake my head in disgust.. And people question whether this stuff goes on in metals? Give me a break!

Currencies today 2/21/17.. American Style: A$ .7655, kiwi .7150, C$ .7602, euro 1.0545, sterling 1.2425, Swiss $.9916, . European Style: rand 13.1062, krone 8.3811, SEK 8.9840, forint 291.61, zloty 4.0912, koruna 25.6165, RUB 58.12, yen 113.65, sing 1.4220, HKD 7.7612, INR 66.96, China 6.8722, peso 20.43, BRL 3.0961, Dollar Index 101.41, Oil $53.74, 10yr 2.42%, Silver $18.04, Platinum $1,007, Palladium $781, Gold $1,236.04, and SGE Gold $1,243.83

That’s it for today. Well, did you have a nice 3-day holiday weekend? I know that some people don’t get to enjoy a 3-day weekend, but I do, and I always get a big kick out them. So much so, that I wish every week had a 3-day weekend! Alrighty, longtime readers recall my love affair with the TV show 24. I didn’t think I would get into the new 24, because Jack Bauer was no longer the main character, but I have to tell you that I’m already hooked on the new 24.. So, Monday nights you know where I’ll be.. glued to the TV, watching 24! The winter is going by fast! OMG! There are only two weeks left of February! I’m still have major problems with back pain but the doc thinks she has an idea but I have to wait another week! UGH! Steely Dan, my good friend, Duane’s fave band, takes us to the finish line this morning with their song: Reeling In The Years.. And with that it’s time to say goodbye~ 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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