RBA Cuts Rates.

* RBA cuts rates.
* Abe to announce fiscal package .
* Currencies are on a roll.
* Metals join currencies.

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

Good Day. And a Tom Terrific Tuesday to you! I’m back in the saddle again. Our where a friend is a friend, where the longhorn cattle feed on the lowly gypsum weed, Back in the saddle again. Well, at least for a couple of days, and then it’s back to the every two weeks procedure, but for now l prefer not to think of that! I had a visitor while I was gone, JMR Doug, was here with his daughter, for a visit, and brought me a bumper sticker with a saying on it by the great Mogambo Guru, who also autographed it! A prized possession I must say! The Rev. Al Green greets me this morning with his ultra-cool song: Love and Happiness. School is just about to start, for some reason, I have no idea why they start so early, but Alex is moving into his new apartment, there’s no stopping the process now!

Front and Center this morning, the Reserve Bank of Australia (RBA) met last night, and much to my chagrin, they decided to cut rates, bringing their internal rate to 1.50%… Can you believe that Australia, a country known for higher interest rates, to combat inflation that comes about from being an island nation, now has an internal rate of 1.50%? I can’t, but then I guess just about anything can happen these days, right? Well, the Aussie dollar (A$) got sold immediately following the announcement by about 3/4’s of a cent, but then when it was thought by the markets that maybe the RBA was finished with rate cuts. Hmmm, I was there, and it didn’t do me any good to think that, did it? No! So, I would be careful if I were making any calls on the RBA and their rate cuts in the future. But the harm done to the A$ has pretty much been erased as we head to the U.S. opening.

I really got into a couple of things yesterday morning, didn’t I? Well, don’t expect that again today, as I used all the arrows in my quiver yesterday, so I could make a Big splash with my return from vacation! Longtime readers will recall the old thing that everyone on the trade desk here would say when I was gone on vacation. “When Chuck’s away, the currencies rally”.. Well, that certainly seemed to be the case this year, as I look at the currency levels on the day before I left, and where they stand this morning, there’s quite a difference, and it’s not a bad difference either! The A$ was .7490 before I left (BIL) and is .7580 on my return (OMR). The euro was 1.1005 BIL, and is 1.1205 OMR, the Swiss franc was 1.0125 BIL, and is 1.0366 OMR. Shoot Rudy, even the S. African rand has gotten into the rally against the dollar, action, as it was 12.2945 BIL and is 13.9365 OMR. And the Japanese yen probably has seen the strongest move so far, as it was 106.60 BIL and is 101.70 OMR. So, what I told you so strongly about yesterday, looks as though it has legs.

Didn’t read the letter yesterday? Shame, Shame, Shame! But you can fix that easily by going to www.dailypfennig.com , and you will be forgiven! HA! I told you BIL that I had done a lot of reflection, and thinking about things that I would tell you about as time went on. And yesterday was one of those things. So, I wouldn’t just shrug off yesterday’s Pfennig if I were you. I know that sounds harsh for me, but come on, think about that, I put myself out on a limb, a big fat one, no worries, and I want everyone to take it in.

And quick, of the 4 precious metals that I cover, which one has had the best performance in the past 10 days? Well, I do believe that it is Palladium, which was $655 BIL and is $717 OMR. But Silver is also cooking with gas these days, and yesterday’s close seeing Silver add 11-cents to its value, bringing Silver to a multi-year high. And Gold is Gold. it gained $2 yesterday and is up $6 in the early morning trading. Did you see the headlines that had Jeffrey Gundlach, the chief executive of DoubleLine Capital saying that “investors should sell everything- except Gold and Gold stocks”. I also liked his quote on investors saying that they, “have entered a world of uber complacency.”

And one more thought here on the metals. Gold and the 10-year Treasury, usually move in opposite directions. The folks at HSBC did some research and found that recently we’ve seen the 10-year yield rise, and the price of Gold rise too, which is an anomaly. That’s not supposed to happen, but yet it is. And why or how could that be happening, I hear you asking? Well, the folks at HSBC say that the markets are now looking at the whole yield curve, and not just the 10-year, And the long term and belly of the Treasury yield curve is really moving. I love when you have corresponding investments that had a trading ratio, or relationship that you can hang your hat on. But when they decide to “break up”, everyone gets hurt. So, don’t hang your hat on this one any longer.

The Japanese PM Abe is supposed to announce the details of his newest fiscal package today. My thought here is that with all the hype surrounding more stimulus for Japan, that the only thing that Abe will do is disappoint the markets, and if that happens, yen should get even more love. I basically don’t see the beauty in yen, and I know that beauty is only skin deep, but to me yen is ugly all the way to the bone, but yet the markets think of it as some kind of wonder-currency. And my longtime boss, and friend, Ed Bonawitz taught me many years ago, the markets are never wrong.

The Bank of England (BOE) will meet this week on the 4th. I said last month that I thought the BOE would take the opportunity following the BREXIT vote to cut rates and increase stimulus, and they did neither. BOE Gov. Mark Carney has really gotten himself in a pickle here with the U.K. economy, debt, and now the BREXIT thing hanging over the economy like the Sword of Damocles. Remember when Carney said he was ready to hike rates (remove accommodation in his words) and I said Hogwash? Well, who was right and who was wrong there? Maybe the BOE should have asked me to be the Gov. ! HA! Anyway, the pound sterling has remained pretty steady with a 1.32 handle, through the past couple of weeks while the other currencies rallied. The BOE has held rates steady at 50 Basis points, or ½%, since 2009. I don’t foresee any rate hikes here this year or next year, and then, if the economy has worked out the kinks of BREXIT, we could see rates rise in 2018, but if the economy struggles, then not until 2019! That doesn’t bode well for the pound.

So, all in all, it appears to be another good day for the currencies, as for the most part, they are booking gains VS the dollar. The exceptions would be the Petrol Currencies that have really had to deal with the global glut of Oil supplies again, and a falling Oil price. The price of Oil is down more than $10 in the past couple of months, and trades with a $40 handle this morning. I read a report this morning, that suggested that the $40 level will be the low for Oil. I sure hope it can find a bid somewhere, or some wind for its sails soon. I do love seeing gas at cheaper prices, but even still, they aren’t as cheap as they used to be, and I’d rather not see the Oil producers jumping out of 20 story buildings.

The U.S. Data Cupboard did have something that I didn’t see on my first view of the economic data yesterday, UGH! The ISM for July, (manufacturing index) printed weaker than expected, at 52.6, while the forecast was for 53.2. Hmmm, remember when I told you that this data had fallen for 12 straight months, and then one month it jumped higher? Well, we’re back to weaker data, showing that June’s bump higher was a one-off print.

Today’s Data Cupboard has two of my faves, Personal Income and Spending.. But this data is for June, which appears to have been a go-go month for consumers, so we’ll have to say that this data for June won’t be any different. That could give the dollar a bit of a lift today, that is if anyone is around to notice.

To recap. The RBA cut rates to an internal rate of 1.50%, that Chuck can’t believe is happening in Australia, the A$ though recovered after getting sold initially. Abe will present his latest fiscal package today, and yen could get more love if he disappoints. The yield on the 10-year Treasury has risen 25 Basis Points since I left on vacation. That’s a lot folks in that short time! And Gold had kept the wind in its sails all that time. strange, eh?

For What It’s Worth. Well, with me being back and all that, I thought I would get caught up on what Ed Steer has to say, and while doing so this morning, I found this article that appears on Zerohedge.com but I have a link that takes you to a similar article on USA Today, and can be found here: http://www.usatoday.com/story/money/cars/2016/07/29/why-ford-talking-like-auto-sales-have-peaked/87695658/

And here’s the Snippet: For most of the last year, selling new vehicles, especially pickups, SUVs and crossover models, has been like shooting fish in a barrel. Credit was easy. Interest rates are still low. Consumers have been able to borrow enough for the car they wanted, rather the one they needed.

But the cars they’re trading in have fetched lower prices at used-car auctions. And there was a modest uptick in delinquencies for Ford Credit.

“There’s no question we’ve seen an increase in incentives, and it’s more than we expected at the beginning of the year,” Ford Chief Financial Officer Bob Shanks told analysts Thursday. “We see the second half being softer than the first half. Looking into 2017, we think we will see further softness.”

Investors saw it as confirmation of suspicions that the U.S. market has crested. Ford shares tumbled nearly 10%.”

Chuck again. Yes, the full article gives lots of reasons why Ford is saying that the auto rally has peaked. Uh-Oh.

Currencies today 8/2/16. American Style: A$ .7580, kiwi .7210, C$ .7660, euro 1.1205, sterling 1.3245, Swiss $1.0366, . European Style: rand 13.9363, krone 8.4425, SEK 8.5440, forint 277.50, zloty 3.8590, koruna 24.1260, RUB 66.54, yen 101.70, sing 1.3397, HKD 7.7602, INR 66.73, China 6.6356, peso 18.90, BRL 3.2705, Dollar Index 95.39, Oil $40.44, 10-year 1.55%, Silver $20.74, Platinum $1,170.90, Palladium $717.55, and Gold. $1,365.90

That’s it for today. I almost had to bail half-way through the Pfennig this morning, as I had a problem with the tumor in my mouth. I won’t get into the mess, but to say, no worries, I get knocked down, but I get up again, nothing’s ever gonna keep me down. Things don’t ever really work the way they’re supposed to for me, but what the heck, what fun would that be if they did? 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. Both renditions are great in my opinion! Things seem weird around here this morning, I wonder what it is. I have a hunch, but will keep that to myself for now. Well, I’m late as usual, so I’ll end this here, and send out hopes that you have a Tom Terrific Tuesday and that you Be Good To Yourself!

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