RBNZ Joins The Club!

* Kiwi loses 2 full cents!.
* Swedish krona is best overnight performer.
* Aussie jobs reports is strong!
* No follow up from Kuroda .

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

Good day. And a Tub Thumpin’ Thursday to you! Well, all the euphoria in the currencies and metals yesterday, was ushered out the door overnight. UGH! I have to tell you that this up one day, down the next day stuff is really wearing on me. The selling of the currencies and metals all got started by the Reserve Bank of New Zealand (RBNZ), who decided to join “the club” and cut rates. So, these things and more in store for you today, but first. The Black Keys greet me this morning with their song: Lonely Boy. Alex got me listening to the Black Keys a couple of years ago, and I thank him for that, as the Black Keys are far better than some of the other newer stuff he listens to, although I must say he has plenty of the songs I have on my iPod on his too, so his taste in music is pretty good!

Well. The RBNZ decided to join “the club” last night, and be like all the “other Central Banks” cutting rates these days. Don’t you want to be better than all the other Central Banks? Apparently not! The RBNZ decided to cut 25 Basis Points from their OCR (Official Cash Rate). RBNZ Gov. Wheeler (yesterday, I misspoke by saying the RBNZ Gov. was Bollard, but Bollard retired a couple of years ago! Apparently Bollard made an impression on me. a bad one, but one nonetheless!), had this to say. “The New Zealand economy is growing at an annual rate around three percent, supported by low interest rates, high net migration and construction activity, and the decline in fuel prices. However, the fall in export commodity prices that began in mid-2014 is proving more pronounced. The weaker prospects for dairy prices and the recent rises in petrol prices will slow income and demand growth and increase the risk that the return of inflation to the mid-point would be delayed.”

Notice not one mention of house prices? Mostly he wanted to rationalize his rate cut by pointing out the negative things. So, the New Zealand dollar / kiwi got smoked overnight. Whew! And I mean smoked! Because in the end, Wheeler appears to be ready to cut rates again going forward… Wheeler said, “We expect further easing may be appropriate. This will depend on the emerging data.” And with that, kiwi has lost nearly 2 full cents overnight.

So, the RBNZ got the selling of the currencies and metals going. The previous night, Japan’s Bank of Japan (BOJ) Gov. Kuroda, whipped up the dollar selling by putting the fear of intervention in the markets’ collective minds, but after one night of dollar selling and yen buying, the markets were no longer in fear, as Kuroda didn’t back up his words with any action. And like I always tell you, my dad taught me years ago, that money talks, and B.S. walks. The BOJ, did allow for some additional stimulus to enter the markets last night, so in the end, it appears that Kuroda was just greasing the tracks for his stimulus. I shake my head in disgust.

So, kiwi is the worst performer overnight. But I’m tired of talking about Wheeler, the RBNZ, and the rate cut, so we’ll switch over the best performer overnight. The Swedish krona! So, what got the krona traders all lathered up? Well, I’m glad you asked, grasshopper. Swedish May CPI (consumer inflation) beat the experts on the upside, printing a 1% year on year rise, and 0.1% month to month rise, both beating the expectations, plus getting back into positive territory, as the April CPI month on month was -0.2%… This should take some of the pressure off of the Riksbank (Swedish Central Bank) to cut rates. And so appropriately, krona rallied nicely.

Another currency seeing appreciation VS the dollar this morning is the Chinese renminbi. Last night China printed their May Retail Sales (+10.1%) and May Industrial Production (+6.2%), with both prints being bang on with expectations, but still good to see that the Chinese economy isn’t falling off a cliff as some economists and writers would have you believe. There was one piece of data that printed that we don’t normally look at, but I guess since it has hit the lowest level since December 2000, it’s worth a quick look. Fixed Asset Investments for May printed at 11.4%… the April print was 12%… But Money Supply dropped in May from 3.7% to 1.8%, but new renminbi loans increased from 707.9 Billion to 900.8 Billion (all in CNY) So, I have to say that overall, the data was good from China overnight, and the Peoples Bank of China (PBOC) decided to allow the renminbi to appreciate.

The price of Oil slipped backwards again from yesterday’s perky looking $61.34, to today’s $60.85. there was news overnight that OPEC’s biggest members are pumping record crude amounts. This is nothing new for the likes of Saudi Arabia, Iraq and UAE, as they cheat on the rest of OPEC all the time. But It’s interesting that just when the price of Oil gets perky again, these OPEC members begin to go hog wild with their crude pumping. Let’s face it, most of Oil’s 45% increase in price since mid-January has been caused by supply disruptions, so OPEC’s biggest members decided to fix that!

So, yesterday, the Petrol currencies were basking in the sun, while the price of Oil was rising, and today those sunny skies have given way to dark clouds, and the Petrol Currencies reverses their gains of yesterday. One day up, the next day down, it’s wearing on me folks.

In Australia overnight they printed their latest Labor Report, and their May jobs created came to 42,000 VS 15,000 expected, and offset the negative 13,700 in April. The Unemployment Rate in Australia fell to 6% from 6.1%… But the Aussie dollar (A$) is getting sold this morning, as this good news was not enough to offset the drag from kiwi. I think when we see data like this, the Reserve Bank of Australia (RBA) has to be smiling like the Cheshire Cat, for they did not choose to cut rates earlier this month. Kudos to you RBA!

Yesterday, I told you about the Mansion House Speech that Bank of England (BOE) Gov. Carney would make on Wednesday, and that I wouldn’t be surprised if he went back to the wishing well once again and talked about how he thought the economy was getting stronger and would need rate hikes. I guess, maybe after pulling those shenanigans twice before, once at the Bank of Canada (BOC) and once at the BOE, with both times seeing that he couldn’t meet his promises, that Carney, decided to not talk about monetary policy yesterday. Instead he decided to chastise the markets for their conduct. What, What? Oh, I see, Carney is just like the current generation, who always find it convenient to blame someone else for their mistakes and errors. I shake my head in disgust, here folks. Carney is the Gov. of the Bank of England! Step up to the plate, take a swing and if you miss, Mark Carney, don’t blame it on the sun in your eyes! Or that someone else didn’t bring your lucky bat, wasn’t that your responsibility to bring your bat?

So. today, we finally get some data here in the U.S. worth looking at, as the U.S. Data Cupboard will have May Retail Sales to print today. The BHI indicates that Retail Sales will have picked up in May from the flat print of April, but still somewhat disappointing. The expectations are for a 1.2% gain, so we’ll have to see where it actually prints, but just about anything positive would be good given the flat print in April, and this data missing the expectations for nearly 9 months now, and printing negative or flat in 5 of those 9 months.

And Gold, has given back nearly all of its gains from yesterday this morning. I mentioned yesterday that the U.S. is going to begin to investigate U.S. Treasuries. Well, this was found on the Bloomberg. “The Justice Department has begun an examination of trading in the U.S. Treasury market, following the outlines of its successful cases against Wall Street’s illegal practices in foreign currencies and other businesses, said three people familiar with the inquiry.
The government is also continuing to look into possible collusion in gold and silver markets and in trading around certain oil benchmarks, the people said.”

I can tell them right here, right now, that these are not the droids they’re looking for. They won’t find anything in Gold & Silver. no wait! Let me take that back, They’ll find something, but will be instructed to look the other way, by the powers that be. But either way, find something or not, Gold won’t really be moved strongly in one direction or the other until inflation rises, or there’s a black swan event.

To recap. The dollar rout ended overnight, and only a couple of currencies are carving out gains VS the dollar overnight. The RBNZ got the currencies selling going by cutting rates 25 Basis Points last night, and watching kiwi drop nearly 2 full cents on the news. The BOJ’s Kuroda, who the night before, whipped up the rout on the dollar, didn’t follow up on his words, and instead added stimulus to the Japanese economy. Australia’s Employment rose 42,000 in May, and their Unemployment Rate dropped to 6% from 6.1% but the A$ got dragged down by the losses in kiwi. Swedish CPI surprised the markets with a positive print and the krona is the best performer overnight. And Gold has given back its gains from yesterday. One day up, next day down, is wearing on Chuck, folks.

Before we head to the Big Finish today, I wanted to bring to your attention the news that this Sunday’s Pfennig & Pfriends will be our own Chris Gaffney, talking about a new MarketSafe CD® that we will be introducing soon, that’s tied to precious metals. Many of you, through the years, have asked me when we were going to ever get around to issuing another Gold or Silver MarketSafe CD again. In the past we did strictly Gold or Silver, and then when it became too costly to hedge those outright we changed to a basket of precious metals, but even those got too costly. But now we’ve found that we can put together another basket of precious metals for a MarketSafe, and Chris will tell you all about that on Sunday. Be sure to open it up when it hits your mailbox, or visit the website: www.dailypfennig.com to read all about it!

For What It’s Worth. First it was the IMF. And now the World Bank is telling the Fed that they should wait until next year before hiking rates. It’s amazing that little old Chuck Butler in St. Louis, Mo. Can see that the Fed rate hikes are not ready for prime time, but now the IMF and World Bank see it too (what took you guys so long?) and you can read it all here, or settle for my snippets. http://www.bloomberg.com/news/articles/2015-06-10/world-bank-joins-imf-in-urging-fed-to-delay-rate-rise-until-2016-iar6kn77

“The World Bank joined the IMF in urging the Federal Reserve to hold off raising rates until next year, citing an uneven U.S. recovery and the risks to emerging markets of tightening policy any sooner.

“My concern is that the signals coming out of the U.S. economy have been mixed,” World Bank Chief Economist Kaushik Basu told reporters Wednesday in Washington on a conference call to discuss the bank’s semiannual global economic forecasts.

A premature move by the Fed could cause the dollar to strengthen, which may slow the U.S. economy and sideswipe emerging and developing countries, he said.

The Washington-based development bank lowered its forecast for U.S. growth this year to 2.7 percent, from 3.2 percent in January. The bank also expects the U.S. to expand at a 2.8 percent pace next year, down from 3 percent in January.

The International Monetary Fund issued a similar warning last week, urging the Fed to delay raising rates until next year unless growth and inflation pick up more than expected.”

Chuck again. Yes, as I’ve pointed out before, Fed Chair Janet Yellen said she still expects to increase interest rates in 2015 “IF” the economy meets her forecasts. Hmmm. I guess we’ll see how her forecasts are doing when the Fed’s FOMC meets next week June 16, 17.

Currencies today 6/11/15. American Style: A$ .7730, kiwi .6995, C$ .8115, euro 1.1235, sterling 1.5455, Swiss $1.0685, . European Style: rand 12.4365, krone 7.8110, SEK 8.2425, forint 277.80, zloty 3.6875, koruna 24.3070, RUB 54.81, yen 123.75, sing 1.3475, HKD 7.7525, INR 63.97, China 6.1150, pesos 15.51, BRL 3.1175, Dollar Index 95.06, Oil $60.85, 10-year 2.49%, Silver $15.91, Platinum $1,107.84, Palladium $742.53, and Gold. $1,180.00

That’s it for today. It’s been a difficult morning, as I didn’t sleep well last night. I think when I get too tired, I find it difficult to sleep, strange, eh? Oh well, no biggie, just dragging the line today. My beloved Cardinals salvage one win in Colorado, and come home with a 4-3 road trip record. Should have been better, but when you win more than you lose on the road, that’s a good thing! I’ve had quite the variety of music on the iPod this morning, everything from Led Zeppelin to The Walker Brothers and all points in between! When I used to sit out on the trading desk, Mike Meyer would comment that he could listen to Frank Sinatra one minute and Def Leppard the next. (I’m sure he wasn’t fond of some of my “older music”, but you’ve got to learn to take the good with the bad! HA!) I received a book yesterday, titled Walking In the Light. And it’s Daily thoughts for a lifetime of thinking. I used to impart daily sayings to everyone, but then I ran out of them. So, get ready! The kids and grandkids were at the house yesterday when I got home, it was a very hot day, so they came over to swim. I couldn’t spend much time with them, as I was dead tired and needed a nap! And I just saw something on TV that ticked me off. Two little girls had a lemonade stand, and it was shut down by the police because they didn’t have a permit. You’ve Got To Be Kidding Me! Having a Lemonade stand is a part of every kid’s summer. Alrighty then, time to go. I hope you have a Tub Thumpin’ Thursday!

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