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RBA Leaves Rates & Bias Unchanged..

* Dollar still sits on top of the hill!..
* RBA is quite upbeat and optimistic!
* Gold gets sold and loses $9.20.
* Chuck admits he made an error!

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

Good Day. And a Tom Terrific Tuesday to you! Well, Monday didn’t turn out to be so Marvelous for me and my family.. My sister, Barbara Jean Butler (Knight) finally lost her battle with ALS (Lou Gehrig’s disease). Barb or Barbie doll as I called her, had a difficult life, but she was always a real sweetheart to me and my family. My two grown kids, Andrew and Dawn, both kept in touch with her through social media, and we always got a big kick out of her visits to the Butler house. Barbie doll had 3 sons, 2 of which are twins. So to Johnny, Brian and Scott, I give you my condolences. And to the rest of my living siblings, I say, I don’t know if I can deal with another lost sibling, so please take good care of yourself!

Know what? I really don’t feel like writing today.. But being the dolt that I am, I told Frank that I would soldier on and didn’t need to call the bullpen.. UGH! I am such a dolt! I should have known that I would be in mental funk this morning, but I refused to believe that, and so here I am. well, let’s do a short-n-sweet letter today, and try to be as normal as possible, I hope that’s OK with you, dear reader..

Fleetwood Mac greets me this morning with their song: Landslide, with the beautiful Stevie Nicks on lead vocals. I used to be “in love” with Stevie Nicks, back in the 70’s and early 80’s. A couple of years ago, I was watching an updated concert with Fleetwood Mac, and my wife, seeing that Stevie Nicks had added some weight over the years, decided to say, “Looks like your girlfriend has gotten big” And I replied, ” Ahhh yes, we would have grown old together nicely” HAHAHAHA

Alrighty then, I got through all that, and now I’m ready to talk about what you came to this letter to read.. Ok, well, the big news overnight is that the Reserve Bank of Australia (RBA) left rates and their neutral bias, unchanged. Those items were pretty much expected by the markets, but what wasn’t expected was the upbeat, optimistic tone of the written statement from the RBA following the rate announcement. I’ve said this before, so it’s not like this is coming from left field.. But I think the RBA is very comfortable with where the economy is, and rates are, and the next move is crucial to the A$’s performance. Will the RBA keep Steady Eddie at the wheel and milk this situation for as long as they can? Or will they see that rates need to be hiked. Or will they see their housing become a bubble and have to cut rates? I think that as long as the RBA can keep the markets off their backs by keeping everything unchanged, and when questioned, they can point to the good data prints. That means the A$ will be range bound as we go forward.

We have 2 more Central Bank meetings this week the Bank of Canada tomorrow, and the ECB on Thursday. And I really don’t expect anything earth-shattering from either of these two Central Banks.. But then you never know.

The dollar continues to be the King of the Hill, and while I see the dollar as an imposter, and will be exposed at some time, it is what it is, and there’s nothing I can do about it, but. to take advantage of cheaper prices for currencies and metals is about the only thing I can do about it! I heard Ty Keough explain this to a customer once. He simply said, ” when the currency prices are down, it means you can buy more of them” I thought to myself, now Chuck, that’s quite simple and well stated, why do you go through a 20 minute dissertation explaining cheaper prices?”

There are a handful of currencies that seem to be able to retain their values VS the dollar, and they include: the A$, rupees, real, rand, and rubles.. 4 of the 5 are considered to be parts of the BRICS currencies (Brazil, Russia, India, China, and S. Africa) Hmmm. Could their ability to retain their values VS dollars, have anything to do with the fact that all of these have good interest rates? Why, yes grasshopper! You’ve learned well. In fact that’s probably the only thing keeping these currencies afloat!

The price of Oil remains well bid with a $53 handle.. I was reading a research piece yesterday on Oil, and the writer believed that the U.S. Shale producers were leaner and meaner than previously, and are ready to start fracking. I thought that if this is true, and bears fruit, then the OPEC boys are going to find that their production cuts don’t mean a thing when the U.S. is producing Oil hand over fist.

And Gold couldn’t find a bid yesterday and was offered throughout the day, closing at $1,225.10, down $9.20 on the day.. And the shiny metal is off by $1.50 in the early morning trading.. I would have thought that the rate hike by the Fed would have already been all priced in. but apparently not! UGH! The last two rate hikes by the Fed, one in Dec. 2015, and the other in Dec 2016, saw the trading pattern for Gold that followed the “sell the rumor and buy the fact” Because each time Gold got sold leading into the rate hike, and then rallied after the rate hike was on the books. Will it be the same this time? I mean you would have had to be living under a rock as a trader, if you didn’t already figure out that the Fed’s coming rate hike doesn’t have anything to do with economic strength. It’s about adding arrows to their quiver for the upcoming problems in the economy.

The U.S economic Calendar will print the Trade Balance read deficit, this morning, and later today, the Consumer Credit (read debt) will print. While neither of these two normally move the markets, they remain very important in my eye.. It’s a matter of building debt to levels that are unsustainable, and then one day, we wake up and we realize the markets have a Minsky Moment.

To recap. The RBA left rates and their neutral bias unchanged last night, and then proceeded to talk very upbeat and optimistic in the statement following the rate announcement. The A$ rallied but then pulled back as the night went along. 2 more Central Bank meetings this week, the BOC and ECB, but both should be non-events. The BRICS are well represented in the list of currencies that are retaining their values VS the dollar. Oil remains well bid with a $53 handle, and Gold lost $9.20 yesterday, and Chuck asks the question is this a case of sell the rumor buy the fact?

Errors and Omissions.. Instead of a FWIW today, I have to admit an error that I made yesterday in reporting the COLA adjustment for 2017 of 0.3% as being a record low amount. A dear reader brought to my attention that in 2016 it was 0%, so 0.3% couldn’t be a record low amount.. So, I apologize for that error, in hopes that it doesn’t happen again!

Currencies today 3/7/17.. American Style: A$ .,7595, kiwi .6977, C$ .7460, euro 1.0577, sterling 1.2206, Swiss $ .9864, .European Style: rand 12.9765, krone 8.4468, SEK 9.0046, forint 292.62, zloty 4.0766, koruna 25.5434, RUB 58.17, yen 113.91, sing 1.4203, HKD 7.7641, INR 66.59, China 6.8838, peso 19.55, BRL 3.1162, Dollar Index 101.75, Oil $53.34, 10-year 2.50%, Silver $17.73, Platinum $ 971.88, Palladium $770.80, Gold $1,224.00, and SGE Gold $1,246.94

I had a dear reader sent me a note yesterday offering his suggestion that in the currency roundup instead of saying Gold, I refer to it as “Paper Gold”, and then the SGE Gold price.. I think I’ll stick with what I have, but thanks for the suggestion, it had me thinking..

That’s it for today. Well, I got through that! The Los Bravos take us to the finish line today, with their song from the 60’s: Black Is Black.. Black is Black, I want my baby back.. And with that I hope you have a Tom Terrific Tuesday! Talk again tomorrow.. hopefully back to normal

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

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