No News Is Good News For Euro Regarding Greece!

June 9, 2015 by

* Dollar gives back jobs data gains.
* Euro climbs back to above 1.1250.
* Both Australia and N.Z. print mixed data.
* Gold attempts two day rally! .

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

Good day. And a Tom Terrific Tuesday to you! Well, the U.S. Women’s National Team got the Woman’s World Cup started on the right foot with a 3-1 win over Australia last night. Not that I had the opportunity to watch it. R.E.M. greets me this morning with their song: Drive, from the Automatic For The People album. In the 90’s, there was probably no bigger rock band than R.E. M., so there a song not from the 60’s or 70’s! There was very little bond yield/ price movement yesterday, nor was there much movement in the price of Oil. So, you can tell from that start, that there’s not a whole heck of a lot to talk about this morning, but longtime readers know, that I can always pull a rabbit out of my hat, ala Bullwinkle, and make it worth the price of admission! HA!

Yesterday, I told you about the G-7 Meeting this past weekend, where the POTUS was quoted as saying that the strong dollar was a problem, but the White House immediately did damage control on the statement, denying that he said that. But all day yesterday, traders got to thinking that the reports said that he said it, so that got the traders thinking that that should help the POTUS with his problem, and began marking down the dollar. The euro rallied back to above 1.12 and is basically now trading at the same level it was before the BLS unleashed their “amazingly strong jobs report” last Friday. So, there! BLS! Take that! HA!

The dollar is mixed this morning though, with the Aussie dollar (A$) , euro, and others giving back some of their gains from yesterday, while the renminbi, rupee, ruble and real have carved out gains VS the dollar overnight and this morning. Regarding the real. Brazil announced at $61 Billion infrastructure project to help spur the economy. Hmmm, that’s all been done before in other places and while it might help if the addition of debt was offset by increased tax revenues from the pickup of the economy, it normally doesn’t end up that way. As the increased tax revenues get earmarked for some other boondoggle, and the debt remains on the books to be financed at a future data. But for now, the real is getting some love from the announcement, so it has that going for it!

So, the S. African rand is the only BRICS country not on the rally tracks this morning. Figures, the rand has been stuck in the mud for a long time now, with no real direction coming from the S. African Gov’t or Central Bank, it’s not a good thing here folks. But the rand has weathered storms like this many times before, so stay tuned. Same rand channel, same rand time.

In Australia overnight, they printed a lot of data reports, but left the night without a clear direction for the economy, which is one of the reasons why I continue to believe that the Reserve Bank of Australia (RBA) can’t cut rates. On the data front from Australia overnight we saw a Business survey, which saw an increase in both Confidence and Conditions. Job Ads were flat, and then Housing Finance saw a 2.6% increase in loan requests, but that data was from April, pretty old and stale if you ask me. So, without any clear direction, traders took some of the froth off the top of the A$ overnight.

Australia’s kissin’ cousin across the Tasman, New Zealand, was their 1st QTR Manufacturing fall 2.8% VS the 4th QTR, but again, this is really stale data. But if you think this nails the rate cut in June down for the Reserve Bank of New Zealand (RBNZ), you’ll have to think again, because House Prices in N.Z. rose from 8.3% to 9.0% year on year. The housing bubble is alive and well in Auckland and the RBNZ will have to think twice about a rate cut in the face of a housing bubble.

China saw their latest CPI (consumer inflation) tick downward again in May from April, falling to 1.2% from 1.5%… Which would probably bring about weakness for the renminbi /yuan, but not last night, as the Chinese currency was allowed to appreciate. Tonight could end up being a good night for the Chinese, as the MSCI (Morgan Stanly global equity stock fund) is going to announce (most likely) that they are going to include Chinese equity shares in their fund. This would be HUGE for Chinese equity shares, folks. And once again, it serves to widen the distribution of renminbi.

No news is good news for the euro, regarding Greece. Actually I’m really beginning to get a rash from talking about Greece all the time. You know Greece the country that has an economy about the size of Kentucky’s economy. Not that there’s anything wrong with the size of Kentucky’s economy, just pointing out the relative size.

Gold is up $8 this morning. The two day rally in Gold (albeit a nascent rally) is all about the weakness in the dollar. Speaking of the weakness in the dollar, you don’t think that currency traders finally saw the BLS jobs report for what it was, a blazingly attempt to pull the wool over everyone’s eyes? Or maybe they read the Pfennig, and voila, they saw through the smoke and mirrors? HA!

The U.S. Data Cupboard is still in search of data prints, although there will be a couple of third tier economic reports today of which they will not add to anyone’s picture of the economy. So, we have to wait for tomorrow’s Retail Sales for May print. I already told you that the BHI indicates that there will be a pickup from the flat print in April, but the pickup will be subdued, and probably disappointing. I guess we’ll have to wait-n-see, eh?

To recap. The dollar has returned to levels it traded VS most currencies before the BLS jobs report last Friday. The dollar rallied strongly on the BLS report, but a funny thing happened on the way to the forum for the dollar, after traders got a whiff of all the games the BLS played with the report. No news is good news for the euro regarding Greece, and the euro is back above 1.1250 this morning. Australia had mixed data prints, and New Zealand had the same, but with a glaring 9% gain in Home Loans in April, really drives a stake into the heart of those calling for a rate cut in New Zealand. And a lack of data in the U.S. remains until tomorrow.

OK, this is where this makes up for the lack of news today. I have two FWIW’s for you to read through today, and make you think. First is something I came across in reading the Daily Reckoning (DR) www.dailyreckoning.com  yesterday. This is note from James Rickards, regarding Janet Yellen’s speech on May 22nd. Let’s listen in.

“Janet Yellen, chair of the Federal Reserve Board, gave an important speech in Providence, Rhode Island, on Friday, May 22. The speech was widely followed by the press and pundits.

News outlets pounced on her statement that “I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate.”

Headline writers warned that the Fed was about to raise interest rates. Markets immediately reacted, sending the dollar up and stocks down on fears of higher rates.

There was only one problem with the reporting, the analysis and the market’s knee-jerk reaction. Reporters left out the biggest little word in the English language — “if.”

Those who took the time to read the actual speech instead of relying on reporters saw that Yellen’s headline quote started with the phrase, “If the economy continues to improve as I expect.”

In other words, Yellen’s prediction of a rate increase is conditional on her forecasting ability. The truth is that no major institution has a worse forecasting record than the Federal Reserve.” – James Rickards from the Daily Reckoning..

And our second FWIW today come courtesy of Dear reader Bob G. who sent me this on Saturday, and I finally got to read it yesterday. it was an article that appeared on the NBC International website, and can be seen in its entirety here: http://nsnbc.me/2015/06/06/russia-gets-very-serious-on-de-dollarizing/

So. what it’s all about is more de-dollarizing by the Russians. Let’s go to the tape! “Russia is about to take another major step towards liberating the Ruble from the Dollar System. Its Finance Ministry just revealed it is considering issuing Russian state debt in Chinese Yuan. That would be an elegant way to decouple from the dependence and blackmail pressures from the US Treasury financial terrorism operations while at the same time strengthening the bonds between China and Russia-Washington’s worst geopolitical nightmare.

Russian Deputy Minister of Finance, Sergei Storchak, announced that his ministry is making a careful study of what would be required to issue Russian bonds denominated in Chinese Yuan. The latest news is part of a long-term strategy between Russia and China that goes at the heart of American hegemony-the role of the dollar as the leading world central bank reserve currency.

The dollar is used in some 60% of central bank reserves today. The second largest is the Euro. Now clearly China is carefully moving, as the world’s largest trading nation, to create its Renminbi or Chinese Yuan as another major reserve currency. That has huge geopolitical implications. So long as the US dollar is leading reserve currency, the world must de facto buy US dollar Treasury bonds for its reserves. That has allowed Washington to have budget deficits since 1971 when the dollar left the gold exchange standard. In effect, China, Japan, Russia, Germany-all trade surplus countries, finance Washington’s deficits that allow her to make wars around the world. It is a paradox that Russia and China at least, are determined to end as soon as possible.”

Chuck again. Well, most of this is nothing new to you dear Pfennig readers, as I’ve been over this many times, but the key thing here is what Russia is considering doing. issuing their debt and denominating it in renminbi / yuan.. Now, for years, the international Banks, like the World Bank, the International Bank for Redevelopment (IBRD) and others would issue bonds denominated in various currencies, but that’s different than this folks. And in the end I think it’s going to help China and Russia get out from the dependence on the U.S. dollar.

Currencies today 6/9/15. American Style: A$ .7705, kiwi .7170, C$ .8095, euro 1.1275, sterling 1.5315, Swiss $1.0770, . European Style: rand 12.4395, krone 7.7885, SEK 8.2965, forint 277.15, zloty 3.6995, koruna 24.2805, RUB 55.82, yen 124.00, sing 1.3500, HKD 7.7520, INR 63.92, China 6.1179, pesos 15.59, BRL 3.1115, Dollar Index 95.24, Oil $58.87, 10-year 2.36%, Silver $16.14, Platinum $1,113.80, Palladium $751.62, and Gold. $1,182.27

That’s it for today. Well, that was quite the spanking my beloved Cardinals received last night from the Rockies. UGH! I was listening to the game in my car, and I knew we were in trouble when the first play was a Cardinals error in the field. UGH. Oh well, time to come back and win the next two! The Tampa Bay Lightning won last night with our St. Louis born and raised Goalie, in the Stanley Cup Finals. I heard that Cardinals star left fielder, Matt Holiday got hurt last night. That’s crazy stuff folks, this team has seen enough injuries that needed surgery. I don’t think we can survive this loss for too long. Well, Kathy came home after over two weeks away last night, and didn’t say one word about the clean house. I can’t win. Oh well. life goes on. The Scorpions are playing their heavy metal ballad, Still Loving You, on the iPod, I really like this song. Those guys sure had some Big Hair! HA! Well, looky there! The sun is out! YAHOO! And today is the Birthday of one of my fave people in the world! Happy Birthday Laura B.! So, now we need to say goodbye to all our company. P-F-E, N-N-I-G see you real soon. HA! I hope you have a Tom Terrific Tuesday!

Chuck Butler
Managing Director
EverBank Global Markets
Editor of A Pfennig For Your Thoughts
1-800-926-4922
https://www.everbank.com