RBNZ Disappoints.

In This Issue.

* Moodys downgrades Canadian banks.
* Yen gets back to weakening!
* Germany data is strong!…
* Oil and petrol currencies rally! .


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

Good day. And a Tub Thumpin’ Thursday to you! I’m really draggin’ the line this morning, and it’s an infusion day later this morning! I can see a very long nap in my future when I return from the infusion center today. How about my beloved Cardinals? They just “swept” the road trip! I don’t know that I’ve ever seen that before, when team wins every game on the road trip. Spirt greets me this morning with their song: Nature’s Way, which I’ve told you before hits me personally every time I hear it.

Well, it looks like yesterday was another day without data and so the dollar retains the conn. And overnight the only currency that’s not trading in yesterday’s clothes this morning, is the New Zealand dollar / kiwi, and it’s getting sold. Having told you that, I would bet that you figured out that the Reserve Bank of New Zealand (RBNZ) didn’t move their bias from tightening to neutral, and you would be correct!

What the heck is the RBNZ thinking these days? All the data has been upbeat and either meeting expectations or beating them. The U.S. is about to hike rates again, so yesterday was the perfect time to move their bias, which would have acted like a rate hike. Is the RBNZ addicted to a weaker kiwi? It sure appears that way to me. I’m so disappointed in the RBNZ on this, and so too are the traders who have kiwi on the selling blocks this morning.

In Germany yesterday the Gov’t reported that German exports grew 10.8% in March! WOW! German companies exported goods and services worth 118.2 Billion euros ($129 Billion). A new record for exports in a month! Germany’s Imports also grew, which is a good sign for domestic growth, and brought the net for the month of 25.8 Billion euros. A very good report all around for Germany and its economy, which, I don’t need to remind you, but will anyway, is the largest of the Eurozone. But. the euro couldn’t garner any love from traders who are giving all their affection to the dollar right now.

Overnight, the ratings agency, Moodys, downgraded all of the major Canadian banks, and that knocked the stuffing out of the Canadian dollar/ loonie, and carried over to the Aussie and New Zealand dollars. (A$ & kiwi) , however, soon after this initial selling, traders realized that they were selling on news that they had already sold on, as the problems were widely known, and already priced in, and so the loonie and A$ recovered. I have to say though this news was new to me, and while I’ve documented the housing bubbles in Toronto and Vancouver, I never got the sense that Canadian banks were, not really in trouble, but being reprimanded. Recall that during the financial meltdown, Canadian banks along with Norwegian banks were shining lights..

Not that I want to talk about stocks, but this news item really caught my eye. It falls under the category of “getting off on a bad foot”. Snapchat’s parent, Snap, reported a $2.2 Billion loss in the its first quarter as a publicly traded company. Whoa! Needless to say, this wasn’t a “good start” for the company, eh?

The Japanese yen continues to book losses and is now trading with a 114 handle this morning. Well, at least Japan is back to booking Trade Surpluses? Recall last year, when they had that few months of Trade Balances in the red? This yen weakness has got to have Japanese PM Shinzo Abe, smiling like the Cheshire Cat! He’s wanted a weaker yen since he took office, and probably before that too!

The Mexican peso is on the rally tracks this morning, moving quickly below the 19 figure. The economic data from Mexico lately, has been fair if not better. Banxico, Mexico’s Central Bank, is still behind, but doing a better job of playing catch-up with getting interest rates to where they need to be to attract foreign investment again. Longtime readers will recall me talking about the peso not having a “risk premium”, or higher interest rate that would act as some protection against currency movement. I’ve said all along that Mexico needs to have a “risk premium” because of their past indiscretions with foreign funds..

Well, the short paper traders just couldn’t help themselves yesterday, and Gold’s $7 early morning gain was wiped out and then some, with Gold closing down $2.30 to close the day at $1,218.80. I would make a big deal out of the fact that Gold is up more than $3 in the early morning trading, but it doesn’t make much difference, as long as the short paper trades have the conn. Oh, come on Chuck, don’t get depressed about this! It’s just what it is! Well, if that’s the case, then pay attention to this next piece.

Thanks to dear reader, Adam, for sending along a link to a blog with an article that talks about how the selling of Gold right now is signaling the next financial crisis. I know, I hear you saying, but Chuck, wouldn’t it be the other way around, people would be flocking to Gold? Ahhh grasshopper, but they are. If you’ve noticed the last couple of weeks, I’ve mentioned that India, Russia, China have all increase their Gold imports. You can add quite a few other Asian countries in that list too. Just because the shorting of Gold with the paper trades are winning right now, doesn’t take away from the fact that demand for physical Gold is still strong.

The price of oil bounced higher yesterday to trade with a $48 handle! And the Petrol Currencies rallied on the news. The ruble, krone, and real all are on the rally tracks today.

The U.S. Data Cupboard actually has some data for us to look at today, not to closely, but to look at and then move along. PPI (Wholesale inflation ) will print for April. And then the usual fare on a Tub Thumpin’ Thursday, the Weekly Initial Jobless Claims print. But tomorrow’s Cupboard will have April’s Retail Sales, of which the BHI (Butler Household Index) indicates it will be a better than the average bar print, after posting a negative month in March. (remember, Easter fell in April this year!)

BTW.. Did you see where U.S. Commerce Secretary, Wilbur Ross, said that the 3% GDP Target is certainly not achievable this year? I think he was doing his very best Aaron Neville impersonation, and telling it like it is!

To recap. Today is much like yesterday, currency wise, with kiwi getting sold, and pesos getting bought, the only two outliers today. The rest of the currencies are trading in yesterday’s clothes. The RBNZ didn’t change their bias, and that deep sixed kiwi, that was already getting sold on the news that Moodys had downgraded all major Canadian banks. The data from Germany yesterday was very good, but the euro couldn’t garner any love, because all the affection from traders is going to the dollar right now.

For What It’s Worth. My local paper, the Post-Dispatch, did it again, they printed an article that was FWIW worth! This is about auto loan fraud, which you knew was going to happen with all the sub-prime car loans, but you can read it all here: http://www.stltoday.com/business/local/auto-loan-fraud-is-soaring-in-a-parallel-to-the/article_6880c076-7581-5e11-97ce-664b6164057e.html#utm_source=stltoday.com&utm_campaign=BusinessNewsletter&utm_medium=email&utm_content=A12874506A3B5805DDED6C95AF30D7173DF7C77A

Or, here’s your snippet: “Borrower fraud in U.S. auto loans is surging, and may approach levels seen in mortgages during last decade’s housing bubble, according to a startup firm that helps lenders sniff out bogus borrowers.  As many as 1 percent of U.S. car loan applications include some type of material misrepresentation, executives at data analytics firm Point Predictive estimated based on reports from banks, finance companies and others. Lenders’ losses from deception may double this year to $6 billion from 2015, the firm forecast.

Those fraud rates are coming closer to the over-1-percent level for mortgages in 2009, when the financial crisis was boiling and more lenders started reporting incidents to one another, Frank McKenna, chief fraud strategist at the firm, said in an interview. While those losses will sting lenders, the impact on the overall economy will likely be much more muted than with the housing crisis, just because there’s less car debt outstanding.

Even so, “We see an extraordinary amount of parallels between the auto and mortgage industries, in terms of the rising levels of hidden fraud,” McKenna said. For home loans, it’s hard to know how widespread the deception was before 2009, because lenders often didn’t report information to one another and may not have even investigated incidents of probable lying much on their own, McKenna said.”

Chuck again. well, like I said this was bound to happen, given the number of sub-prime auto loans that were being written. It’s just the nature of the beast folks. And while this won’t have the same effect as the housing bubble in 2008, it will be a hit to the economy, which is in no shape to be taking any “hits”.

Currencies today 5/11/17. American Style: A$ .7375, kiwi .6849, C$ .7397, euro 1.0870, sterling 1.2920, Swiss $.9925, . European Style: rand 13.3343, krone 8.5970, SEK 8.8757, forint 285.64, zloty 3.8841, koruna 24.4678, RUB 57.99, yen 114, sing 1.4076, HKD7.7890, INR 64.33, China 6.9036, peso 18.93, BRL 3.1783, Dollar Index 99.58, Oil $48.07, 10-year 2.39%, Silver $16.36, Platinum $916.37, Palladium $809.06, Gold $1,223, and SGE Gold $1,232.94

That’s it for today. 2 hours in a dentist’s chair yesterday for yours truly. UGH! Fun times, for sure! NOT! It’s finals week for son Alex this week, so we won’t hear from him or see him until they are over. This is one time I would not like to change places with him! Tests were never my cup-o-tea.. I usually didn’t have problems with them, but preparing for them was real pain for me! Cardinals come home in first place, and face the defending World Champion Cubs this weekend. Should be good games. Led Zeppelin takes us to the finish line today with their great song: Kashmir, which I believe is one of Mike Meyer’s fave songs. And with that, I’ll get out of your hair for today, and send you on your way to a Tub Thumpin’ Thursday! Be Good To Yourself!

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