The Dollar Continues To Take The Currencies & Metals To The Woodshed! 

A Pfennig For Your Thoughts

 September 7, 2022

* Currencies & metals get sold again on Tuesday… 
* The U.K has a new Prime Minister.. 

Good day… and a Wonderful Wednesday to you! Where has the warm/ hot days of late summer gone this year? I realize that summer is about to end, but that has never meant that the temps cool immediately as we turn to autumn. I’m not complaining here, just talking about how we’ve had a run of beautiful weather here in the MidWest… My Beloved Cardinas got back on the winning side last night. I head to the heart doctor this morning, I’m wonder what he might talk about this time? Weezer greets me this morning with their song: Island In The Sun… 

Well, there’s no two ways about this, the dollar is king of the hill and there’s no other currency to fight the dollar. The dollar has pushed the currency appreciation envelope all the way across the desk, and is looking for another desk to continue its push! The BBDXY gained more than 4 index points yesterday, and in the overnight markets it has gained another 4 index points! The Dollar Index is pushing to a record high, and damage that the dollar is inflicting on the currencies, like the euro, Aussie dollar, kiwi, krone has been devastating. and shoot Rudy, even the Russian ruble has slipped a little! 

And it’s not just the currencies that can’t take this heat the dollar is applying right now. Gold & Silver can’t find a bid and lost more ground yesterday. Gold lost $8.60 to close the day at $1,703.36, and Silver lost 13-cents to close the day at $18.11… I know that 95% of you dear readers look at Gold priced in dollars. But the other 5% of you dear readers are foreign and denominate your Gold in your local currency, and to you, Gold is at record highs… But that’s because your local currency has fallen at a greater rate than Gold. 

The price of Oil remained trading with a $87 handle yesterday, and throughout the night. The OPRC decision to cut Oil production, hasn’t set its hooks into the Oil price yet, I’m sure Oil traders want to confirm that the OPEC members really do cut production, as their individual history shows that there are always cheaters… 

And bonds keep seeing their respective yields grow larger, it’s like a weed in your garden these days… The 10-year Treasury’s yield rose to 3.32% yesterday and last night, that’s quite a jump from the 3.10% yield it sported at the end of August! To me, these quickly rising yields are just playing catch-up, as they were held down too long, as traders believed the Fed Heads would pivot and rates had gone as far as they were going to go. But that thought has been thrown out with the bathwater, and now it’s time to get yields higher to fight inflation. 

In the overnight markets last night, I already told you that the BBDXY gained 4 more index points overnight, and everything else is falling around the dollar. I’m still perplexed as to why the currencies of Australia and New Zealand are getting taken to the woodshed. These two respective countries have hiked interest rates and kept pace with the Fed Head’s rate hikes, but they get slammed to the ground like everyone else that hasn’t hiked their rates at the same pace, i.e. the Eurozone and Japan! 

Speaking of Japan… their yen continues to lose ground to the dollar, the yen trades this morning at 144.70… A weak currency invites inflation into the economy, and something that I always thought Japan needed to get their economy moving again. Will this come to fruition? I’m questioning my thoughts on that now… As the yen has really lost a lot of ground, and the inflation rate should have been rising in Japan… Maybe I just need to be more patient, these things are not in the instant gratification league… 

OK… Well, I reported a few weeks ago, that the leaders of the Eurozone had less than 3 months to figure out how to avoid a very cold winter without Russian Oil and gas. Well, to emphasize this even more, I found this tid bit on zerohedge.com last night, check it out: “Two days after Russia indefinitely halted natural gas supplies via the Nord Stream 1 pipeline for the amusing reason that there was an “oil leak” on Monday Russia finally admitted what everyone has known since February – namely that it has weaponized commodities in response to the West’s weaponization of currencies (as Zoltan Pozsar has said all along), when the Kremlin said that Russia’s gas supplies to Europe via the Nord Stream 1 pipeline will not resume in full until the “collective west” lifts sanctions against Moscow over its invasion of Ukraine.

Putin’s spokesman, Dmitry Peskov, blamed E.U., U.K., and Canadian sanctions for Russia’s failure to deliver gas through the key pipeline, which delivers gas to Germany from St Petersburg via the Baltic sea.

“The problems pumping gas came about because of the sanctions western countries introduced against our country and several companies,” Peskov said, according to the Interfax news agency. “There are no other reasons that could have caused this pumping problem.”

Chuck again… So, it’s a simple fix for the Eurozone… drop the economic sanctions, and don’t freeze… 

The Bank of Canada meets today, and is expected to deliver a super-sized rate hike. They will be followed by the European Central Bank (ECB) that will meet on Thursday, and they too are expected to deliver a super-sized rate hike. Both of these Central Banks are now playing catch-up as they are far behind the inflation 8 ball… I just don’t think they are going to be able to save their respective currencies from all this dollar strength. They might provide a quick uptick, as opposed to what it should provide, if not for all the dollar strength. 

But, you’ve got to start to fight back against all this dollar strength, at some time, eh? I give these two Central Banks a little credit for finally seeing the light, albeit too late though…  

The U.K. has a new Prime Minister, Liz Truss, is her name, and she’s stepping into a s&*% storm… The currency is weaker than Olive Oyl, and inflation is soaring, and the economy is drowning in debt… Good luck Liz, you’re going to need it! 

The U.S. Data Cupboard today has the latest Trade Deficit numbers, and a couple of Fed Heads speaking… These Fed Head speaking engagements have really become a sound board for the markets to trade from… I remember a time when no one knew who the Fed Board members were! I was speaking on the phone with good friend, Dennis Miller, last week and I mentioned the Fed President before Volcker… Can you name him? No searching on Google is allowed!  

You don’t have to email me with the answer if you know it, just know that you are one of a few that can name him… 

To recap… The dollar is soaring and there’s no holding it back any longer! The BBDXY has gained more than 8 index points since yesterday morning, and there’s not one currency out there that hasn’t felt the pressure of a strong dollar. Gold & Silver can’t find a bid, and Gold is danger of falling below $1,700… Gold in other currencies around the world is still high, but against the dollar, not so much… And Bonds have finally given up the ghost on their thought that the Fed will pivot, and decided to push yields higher, and higher. The 10-year has gained 22 bips since we changed the calendar to Sept…. 

For What It’s Worth… This is a very important article to look into folks… It’s a very good explanation of the deep dookie we are in here in the U.S. and it can be found here: Fed Can’t Avoid a Recession or Bring Inflation Down to 2%: BlackRock (businessinsider.com)

Or, here’s your snippet: “The Federal Reserve may not be able to avoid a recession – and may not be able to bring inflation back down to its 2% target either, according to analysts from BlackRock.

Markets are expecting the Fed to stick to aggressive rate hikes after Chairman Jerome Powell’s speech at Jackson Hole last month.

But higher rates won’t solve the biggest problem, namely low production capacity, analysts said, meaning low supply relative to demand. Without addressing supply, the Fed would have to lower demand by 2% via rate hikes to get inflation down quickly.

“The Fed will be surprised by the growth damage caused by its tightening, in our view,” analysts said in a note on Tuesday. “When the Fed sees this pain, we think it will stop raising rates. It will be too late to avoid a contraction in economic activity by then, we think, but the decrease won’t be deep enough to bring PCE inflation down to the Fed’s target of 2%. Instead, we expect inflation to persist close to 3%.”

The Federal Reserve has scrambled to bring down sky-high inflation this year, but so far, has only seen only a slight fall to 8.5% inflation in July.

Meanwhile, GDP has declined for two consecutive quarters, signaling the US is already in a technical recession, and supply bottlenecks from the pandemic are lingering in key markets.

“The U.S. economy has already stalled. Now we see recession in the cards early next year,” BlackRock said.”

Chuck again… yes… even though the Gov’t won’t use the “R” word, recession as I would have it, we are in a slowdown of the economy, and it’s only going to get worse… Too much debt, too much currency printed, and too much of the thought process by the Gov’t, that if they just ignore it, it will all go away… 

Market Prices 9/7/2022: American Style: A$ .6717, kiwi .6020, C$ .7594, euro .9893, sterling 1.1426, Swiss $1.0148, European Style: rand 17.4105, krone 10.0404, SEK 10.8077, forint 405.74, zloty 4.7697, koruna 24,9061, RUB 61.00, yen 144.70, sing 1.4091, HKD 7.8498, INR 79.90, China 6.9188, peso 20.12, BRL 5.2572, BBDXY 1,315.96, Dollar Index 110.62, Oil $87.16, 10-year 3.32%, Silver $18.16, Platinum $858.00, Palladium $2,012.00, Copper $3.48, and Gold… $1,702.97

That’s it for today… It’s been 6 weeks since my beloved Cardinals lost two games in a row, and that my friends is how you build a good record to lead a division! I did find someone to attend the day game on Thursday with me, so I’ll be in baseball heaven tomorrow! This being a holiday shortened week, doesn’t have too much going on other than daily beatings of anything not named the dollar… One thing that happened at our BBQ party on Saturday that I keep seeing in mind, is Little Evie eating chicken wings, and having the sauce all over her face, and then her needing water to drink! So funny, and cute! R.E.M. takes us to the finish line today with their song: It’s The End Of The World… Hmm… OK, I hope you have a Wonderful Wednesday today, and will Be Good To Yourself!

Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts