No Diss, And An Upbeat FMSR Sends Kiwi Higher!

Good day… And a Wonderful Wednesday to you! Whew! I had a much better night of sleep last night! I still don’t know what the problem was on Monday night, but I certainly was glad it did not return last night! Not much going on in the currencies or metals as I fire up my laptops, and check out what went on in the overnight markets… Another loss for my beloved Cardinals. The offense has simply dropped off a cliff, and dolt me, I stayed up to watch most of that debacle last night! The Band Yes, greets me this morning with their song: Roundabout… The Big Boss, Frank Trotter, sent me a link to an article on what the song Roundabout is all about, the last time I mentioned this song…

Well, as I said in the opening, not much going on in the currencies and metals.. Although we did have one strong move overnight from kiwi, which got a clean bill of health from the Reserve Bank of New Zealand’s (RBNZ) Financial Monetary Stability Report for May. I’m waiting for the data of the day which will come from the Eurozone, where their May CPI (consumer inflation) will print. Here’s the skinny, Eurozone CPI bumped higher in March and April (up to 1.7%) and Eurozone President, Mario Draghi, shrugged it off saying that it was “short-term” and wouldn’t continue to go higher. The experts have this May CPI report as confirmation of what Draghi was saying, and they think CPI could slip back toward the 1% level that was prevalent in the Eurozone before the last two months… So, in the end this morning, the euro will be tied to “how much CPI falls in May”… Like I said, we’re waiting for the data to print as I write…

I mentioned the RBNZ’s Financial Monetary Stability Report (FMSR) above… The report was upbeat and confirmed what I kept saying, which was that the New Zealand financial system is sound, and the risks facing the system have reduced in the past 6 months… The “risks” that the RBNZ is talking about is the Housing Bubble in Auckland. You may recall me telling you a few months ago, that the RBNZ had tightened the LVR (loan to value ratio) and that has done a lot of the heavy lifting toward reducing the risks… However, RBNZ Gov. Wheeler was quick to point out that, “As sharp reversal in risk sentiment could lead to higher funding costs for N.Z. Banks and an increase in domestic borrowing costs.” Wheeler also pointed out that “the outlook for the global economy has been improving but global political and policy uncertainty remains elevated and debt burdens are high in a number of countries”…

Thanks to my friendship with the former Gov. of the RBNZ, Don Brash, who set me up to receive Reserve Bank notices a long time ago… These notices give me RBNZ insight , which is helpful, like the info on the FMSR… I have to say that I was shocked that RBNZ Gov. Wheeler, didn’t diss kiwi in the press conference following the issuance of the FMSR! And so, with RBNZ Gov. Wheeler not dissing kiwi like he usually does, and the FMSR having an upbeat tone to it, kiwi took off and gained over 1/2-cent to a 71-cent handle this morning… Remember a couple of weeks ago, when kiwi got the stuffing knocked out of it, and fell back to a 68-cent handle? I like looking at 68-cents in the rear view mirror!

Well, the risk meter should be ratcheting higher this morning on the news overnight that a bomb exploded in Kabul near the opening of the Green Zone which houses U.S. military headquarters and embassy… I was watching Gold not reacting at all to the news of the suicide bomb explosion. So, maybe I’m making more of this information than needs to be made of…

The euro has bumped up 20 ticks from where it was when I first turned on the currency screen this morning. Maybe the CPI data has printed and I’m just not seeing it yet… I’ll keep an eye out for that!

Pound sterling got whacked again last night after another poll, this time it was the YouGov poll, which showed a further narrowing of the lead for Conservatives, and the YouGov pollsters decided to make a call afterward, saying that they believe that Conservatives could lose their majority in this election… Wait! What? OK, calm down and read on… It appears that the YouGov Poll is not a broad poll and therefore they have a wide plus- minus adjustment on their numbers… So, let’s take this report with a grain of salt and move on, eh?

In China last night, their May PMI (manufacturing index) printed better than expected at 51.2 and expectations at 51… The April PMI was also 51.2, so no gain or loss for the Chinese in May, with regards to manufacturing. The Chinese renminbi was allowed to appreciate a small bit on the PMI print outcome. Stabilizing data is important to China right now… They need all the stabilizing they can get!

Well, looky there! The euro has just jumped above the 1.12 handle, I’m still not seeing any data printing, but… Even a quick check of my Eurozone economic calendar didn’t show me what I was looking for to confirm that a better than expected CPI report is responsible for the move in the euro this morning. I did see most of the CPI reports for the individual countries of the Eurozone, and most of them were reporting better than expected CPI for May, except Germany, and with Germany being the largest economy of the Eurozone, it throws a larger than the average bear, spanner in the works, so I guess I’ll have to wait-to-see the Eurozone CPI report… In the meantime, the euro has bumped higher…

The Bank of Brazil (BOB) meets today, and will announce a rate cut… At least that’s how I see it… I see the BOB cutting their Selic Rate (internal rate) 100 Basis Points today! That would bring their Selic Rate to 10.25%, and that won’t be the last of the rate cuts from Brazil going forward… Just to prove the BOB is totally removed from any influence of politics, they will cut the Selic Rate by 100 Basis Points even though the real has been getting sold like funnel cakes at a State Fair, because of Political risks in Brazil..

Earlier this month, I said something about the former President Dilma Rousseff who was impeached earlier this year. I said that current, interim President Temer, had charges brought toward him on the news that he knew about the illegal funds that went to Rousseff… Someone close to the Brazilian news sent me this when I made that error… “Rousseff has never been charged with taking bribes. She was accused of knowing about them, but there was no evidence. Edward Cunha took bribes and now we know VP Michael Temer was also involved with the bribes. Rousseff was officially impeached for providing false data about the state of the Brazilian budget just before an election. As Wikipedia puts it “finding Rousseff guilty of breaking budget laws and removing her from office.”

There has never been a claim that she took money.”

Chuck again.. that’s what I get for getting into “politics” especially in a foreign country!

It is Month-end, and there could very well be position squaring for the month-end numbers, but with May not being a (quarter-end) the position squaring probably isn’t going to mount too much, but as I said we could very well see some today. If we see any it would probably benefit the currencies with some yield differential to the dollar…

The reason I say that is that these currencies with some yield differential to the dollar had been see the most shorting, due to the rate outlook of the U.S. (higher), which would mean a narrowing of the yield differentials, and thus potentially weaken the higher yielding currencies… But that’s just for today, folks… once we turn the page on June 1, the shorts can go back on, literally and physically! It’s unofficially, summer, the kids are out of school, so it’s time to get those sharts (as our Little Christine pronounces SHORTS) out and wear them!

The price of Oil continued to slide downward in the past 24 hours… After the OPEC meeting, Oil slipped, then recovered going into the weekend, then has gone back to slipping downward again.. not a lot of stability here, and certainly not on terra firma! The Petrol Currencies have been going back and forth alongside Oil, but at least the Norwegian krone has the euro strength on one side to keep it from getting sold too much.

The U.S. Data Cupboard got things going yesterday morning with a print of Personal Income and Spending… Once again, everyone is wishin’ and hopin’ and thinkin’ and prayin’ for Consumer Spending to pick up… And it did… Here’s the skinny… Both Personal Income and Spending grew at a 0.4% clip in April… I would like to think that this is good for the economy… But I’ll have to see more of this, because March’s report wasn’t exactly stellar, even with an upward revision! This data also has a PCE component to it. (Personal Consumption Expenditures) which is the Fed’s preferred inflation report, and this component rose 0.2% putting the year on year rise at 1.7%… Still not 2%… Still not reaching the Fed’s target… And that’s just fine with me!

The Case/Shiller Home Price Index for March was unchanged at a 5.9% increase…. And Consumer Confidence which has been running at all-time highs, saw a little slippage in May from April’s 119.4 sliding down to May’s 117.9.. Still quite high… and still no call to Chuck to see how confident he is!

Today’s Data Cupboard only has Pending Home Sales for April… That’s not exactly going to move any markets… We will get the privilege to hear what two Fed members have to say today… Robert Kaplan and John Williams will speak today, and I expect both of them to walk the straight line to a Fed Rate hike… And we could get more talk about the Great Unwind…

Gold had a down day yesterday, but the close was much better than the trading during the day, which saw the price of Gold slip by $11 and change at one point in the day. But Gold closed down just $3.80 at $1,262.80… The shiny metal is up a buck or two this morning, no big shakes… You know, I tell you all the time about the Gold accumulation that Russia and China continue to hoard… Well, if you do the math (don’t worry someone else has for you!) these two countries are basically taking on the entire global production of physical Gold, which leaves nothing for you and me, and jewelers and so on… An asset can only hold its current price when a scenario like this comes along, for so long… And then it historically breaks out to the top side, because of the lack of supply and the strong demand… That’s why I told some folks on the Butler Patio that I see Gold moving to $1,300 by summer’s end… of course I told them that was just my opinion and I could be wrong!

To recap… Not much movement from the currencies & metals so far today… The euro has bumped higher on what Chuck believes is a better than expected May CPI in the Eurozone. Kiwi has jumped to a 71-cent handle on an upbeat Financial Monetary Stability Report and no dissing of the currency by RBNZ Gov. Wheeler last night. Gold lost $3.80 yesterday, and is up a buck or two this morning. Chuck is somewhat inquisitive about why Gold is not reacting to the news that a suicide bomb exploded in Kabul Afghanistan? The U.S. Data Cupboard told us yesterday that Personal Income & Spending both increased by 0.4% in May, that the PCE was at 1.7% year on year, and that Consumer Confidence slipped a bit in May, but is still very high…

For What It’s Worth… You know how I keep saying the U.S. economy is going nowhere? Well, this writer from MarketWatch is pointing that out.. The article can be found here:

Or, here’s your snippet: “A new pro-business president, record stock-market prices and the highest level of consumer confidence in years shows a lot has changed for the U.S. economy in 2017. But one thing hasn’t: Headline growth appears frozen in time.

Even a pickup in gross domestic product in the spring to 3% from 1.2% in the first quarter — helped by another strong month of employment gains in May — won’t alter the bigger picture.

Read: Economy wasn’t as bad as it looked in first quarter, GDP shows

The U.S. is still expanding at a roughly 2% annual pace that’s prevailed since a recovery took hold almost eight years ago, well below its historic 3.3% average. President Trump has vowed to restore the “good old days” but so far progress is scant.

“We are still on the same track,” said Sam Bullard, senior economist at Wells Fargo Securities in Charlotte, N.C.”

Chuck again.. The article goes on to say that the writer believes we are better off this year, than last year with the economy… Well, Let’s see… The economy went nowhere last year, and so this year we’re going nowhere faster!

Currencies today 5/31/17… American Style: A$ .7458, kiwi .7110, C$ .7430, euro 1.1216, sterling 1.2842, Swiss $.9713, … European Style: rand 13.0789, krone 8.4301, SEK 8.7028, forint 273.76, zloty 3.7187, koruna 23.5597, RUB 56.51, yen 110.83, sing 1.3824, HKD 7.7911, INR 64.45, China 6.8554, peso 18.73, BRL 3.2579, Dollar Index 97.12, Oil $48.60, 10yr 2.22%, Silver $17.30, Platinum $944.10, Palladium $808.90, Gold $1,266.30, and SGE Gold.. .$1,266.85

That’s it for today… The end of May… Pretty amazing to me that the year is flying by again! Tomorrow we welcome the month of June… I have NO Doctor’s appointments this week, nor do I have an infusion! It’s like I got a “get out of jail free” card! YAHOO! That could mean that I’m making a call to the Pizza Man Pizza every night! But I don’t see that happening… I just haven’t been that hungry at night recently… Tomorrow evening I’m going out! We’re having a retirement party for my good friend, Frank Trotter… I’ve been asked to say a few words, since I’ve known him longer than anyone else at the bank… And that’s what I’ll be working on today… I have to say the exact right things, I get no Mulligans, and I have to attempt to not be too sappy, in fears that I would get emotional and tear up! I used to tell people at presentations that Frank and I did together, that Frank & Chuck have worked together so long, that when we started the Dead Sea wasn’t even sick! HA! The Black Crowes take us to the finish line today with their song: Hard To Handle, which was originally done by the great Otis Redding. I prefer his version, but the Black Crowes did an excellent job on this song too! And with that, I hope you have a Wonderful Wednesday! Be Good To Yourself!

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

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