The Dollar Soars Overnight!

A Pfennig For Your Thoughts
 
July 11, 2022
 
* Friday saw the dollar get sold a bit… 
* But the overnight markets put the dollar on top again… 
 
Good day… And a Marvelous Monday to you! The heat backed off after some showers early Saturday, and we were left with some marvelous weather! I went to the Cardinals/ Phillies game yesterday (day baseball!) with sons, Andrew and Alex, and a part time son, Jeff… My beloved Cardinals won in a comeback game 4-3, to salvage 1 of the 3 games this past weekend VS the Phillies. A grand time was had by all 4 of us, even in the sweltering heat of the sun… We got back to my house to see little Evie in the pool having a ball… She is so darned darling! Jack Johnson greets me this morning with his song: Flake. Back at the turn of the century, Jack Johnson was HUGE!
 
The dollar traders were so confused on Friday… The Jobs Jamboree was stronger than expected, and that should have meant that the Fed/ Cabal/ Cartel won’t have to be so aggressive with a rate hike on July 28th… And that the economy isn’t going into a recession, which would counterbalance the trading on the jobs report… Like the two handed economist… On one hand, we won’t be raising interest rates as aggressively going forward, which is bad for the dollar, and on the other hand, we won’t be experiencing a recession after all, which would be good for the dollar… See how traders could have been confused?
 
And so the dollar ended the day on Friday with the BBDXY at 1,279.25, and when I left you on Thursday, the BBDXY was 1,279.19… The euro found a way to fight through all the short sellers, and gain a bit on Friday… The short sellers in euros are coming out of the bushes, and dark closets, to short the beleaguered currency. And these short sellers are taking bets on just how low the euro will fall below the $1.00 level or parity with the dollar. The euro is in need of a white Knight to save it from all this short selling… The European Central Bank (ECB) would have to be that Knight in shining armor, to come through with a rate hike to take the Eurozone deposits out of negative territory.
 
The metals found some buyers on Friday… Gold gained a whopping $2.80, and Silver gained an equally whopping 10-cents! Pardon my smart alec mood, but the whippings that Gold & Silver took last week, were unbelievable… to say the least! So, therefore, I’m a bit jaded this morning with regards to metals traders, etc.
 
The price of Oil rebounded with a leap late last week and into the weekend, ending the week trading with a $104 handle… Just last week Oil had dropped below $100… I still shake my head in disgust over the way we squandered our Oil reserves… As I see it, the release of 1 Million Barrels A Day for 180 consecutive days leading up to the election, was done so only for political reasons… You see 1 Million Barrels a Day, is only just 1% of the 100 million barrel per day global market. And guess what it did for the price of gas at the pump? Well, prices of gas are up 15% since the announced oil reserves release!
 
So much for the plans of mice and men, eh? Oh, and one more thought here, our oil reserves after the release is finished will be just 390 Million Barrels, bringing it down to 1986 levels, when the program was ramping up… Tsk, Tsk… There were called the “Strategic Petroleum Reserves” SPR’s… Nothing “strategic about using them to gain political favor, is there?
 
And the 10-year Treasury traders are just as confused as the dollar traders after the Jobs Jamboree… The yield on the 10-year rose to 3.08% to end the week, after falling as low as 2.92% last week… A friendly Spiderman reminder that bonds trade with the price and yield of the bond being the counterbalance of the two, in other words, as yields rise the price goes down, and vice versa…
 
The Japanese yen, which has seen major selling, in recent times, now has another problem to deal with and it has to do with the psyche of the country, after former PM Abe was assassinated last week, in a country with strict gun laws…
 
In the Overnight Markets last night…. OMG! The dollar was kicking tail and taking names later last night… The BBDXY gained 9 index points overnight! The euro fell another cent, as did the Aussie dollar, and the rest of the currencies fell in behind them. Gold is down $7.85 in the early trading, and Oil has given back $3 of its gains on Friday last week to traded this morning with a $101 handle.  
 
What got into the traders overnight? I think it was the two Fed Heads that commented on how they believed that the next rate hike will again be aggressive at 75 Basis Points… That’s the only thing I can see weighing on the currencies and Gold this morning… 
 
Well… the Jobs Jamboree last Friday, was something! What that something was is beyond me, but it was something! HA! The BLS said that 372,000 jobs were created in June, with the word “created” being the operative word here… Because the BLS has been know to “create” jobs out of thin air, and add them to the surveys… In recent months, they’ve really gone to the well to create jobs out of thin air… In April they added 340,000, in May they added 213,000, and last month they added 64,000… but even taking the 64,000 from the 372,000, still leaves over 300,000 new jobs in June… Which, makes sense, given that in June, all the high school and college grads go out looking for jobs…
 
I still find this over 300,000 new jobs to be suspicious, given that the Weekly Initial Jobless Claims have been inching higher and higher each week… But why would I waste your time and mine trying to figure out the stupid accounting in our Government?
 
There are reports going around that say that Germany’s economic superiority in the Eurozone is sputtering… Uh-Oh! If there’s one thing that the rest of the Eurozone could count on was the resiliency of the German manufacturing sector… But all the sanctions on Russia, the economic shutdown from the plandemic, and now a global economy that’s teetering toward a global recession, has Germany’s manufacturing sector sitting on a cliff… This outlook has got to be weighing on the euro… So take this into consideration along with the dollar taking no prisoners right now, and you’ve got the recipe for euro weakness, which we’ve seen for over a month now.
 
I told you last week that traders were saying that the euro was “unbuyable”, and that’s the first time I’ve heard that since the euro was trading around 92-cents around the turn of the century… The Eurozone’s debts are coming back to haunt them once again, folks… Just like back in 2011, when the debts of Greece were first exposed… None of the countries that make up the Eurozone, have done one thing to correct their debt situation, in my opinion, and it was only a matter of time, before the dollar took off to higher ground, and pushed the euro downward once again.
 
Well, 2 Fed Heads mentioned this past weekend that they favor another 75 Basis Points rate hike later this month, but then looking at smaller rate hikes afterward… I’ve gone on record saying that I think the Fed Heads will chicken out on keeping up with strong rate hikes to combat inflation…
 
Speaking of inflation… We’ll get to see the stupid CPI for June on Wednesday this week… The stupid CPI is expected to show a 1.1% increase month over month, and an annualized increase to 8.8%, from 8.6% in May… So much for thinking that inflation had peaked, eh? I know, I know, this is not the inflation report that the Fed Heads use, but it’s the one that most traders view first, and make knee jerk reactions to, so therefore I have to follow it… Of course I’ll also check with www.shadowstats.com to see where they put actual inflation at… For instance last month, they showed inflation really at 16%… Now, doesn’t that seem more like what you’re feeling?
 
I’m really tired of beating on the Fed Heads for all this dumb as a box of rocks moves… I also know that you’re probably tire of me beating on the Fed Heads… But… They are what I would consider to be low hanging fruit, when it comes to finding someone to blame for all this mess we’re in… So, even though, I’m aware that I’m beating on them a lot, I can’t stop… They’re just to easy to pick on!
 
Bloomberg reported last week that China’s Ministry of Finance is considering allowing local governments to sell 1.5 trillion yuan ($220 billion) of special bonds in the second half, an unprecedented acceleration of infrastructure funding aimed at shoring up the country’s beleaguered economy.
 
The bond sales would be brought forward from next year’s quota, according to people familiar with the discussions, who asked not to be identified because they aren’t authorized to speak publicly. It would mark the first time the issuance has been fast-tracked in this way, underscoring growing concerns in Beijing over the dire state of the world’s second-largest economy.- Bloomberg.com
 
Chuck again… This is a tried and true playbook for the Chinese, to stimulate the economy and put people to work, something that is needed after their Covid-zero plan keeping the economy down… And don’t worry, China has a Treasure Chest of reserves to use to pay for this stimulus…
 
Unlike the U.S., which is going to use a $90 billion bailout for more than 200 near-insolvent multiemployer pension plans — covering some 3 million union workers. I hear you asking, where did they get that money from? Well, the simple answer is from the American Rescue Fund (ARF) which was supposed to be earmarked for COVID problems… So, excuse me for being somewhat jaded here, but since when did Pensions that have been underfunded for years, come under COVID problems?
 
And then the full answer to the question is… drum roll please…. You and me! Taxpayers… Yes, here I am in Fenton, Mo, paying my taxes to bail out a pension in Ohio… Something is awry here… I’m just saying…
 
Do you smell what I smell? The aroma is akin to a political pay off… But I digress…
 
One more thing to think about this morning… Reuters is reporting that the operator of Texas’s power grid called on state residents for the second time this year to conserve energy, warning of potential rolling blackouts amid predictions for record-high temperatures.  
 
Now could this just be a case of the boy who cried wolf? Or should this be something that Texans should be worried about… You decide… 
 
The U.S. Data Cupboard this week will have a couple of real economic data prints, but none today… and besides the stupid CPI and then PPI on Thursday, most of the real economic prints will come on Friday this week, like Retail Sales… So, we have a couple of days this week in which to discuss these further…
 
To recap… dollar traders were confused on Friday, but in the overnight markets last night they got right smack dab on the dollar band wagon again… Gold and silver got bought on Friday, along with Oil… But bonds got sold big time with the yield on the 10-year rising from 2.925 to 3.08% to end the week. It appears that the dollar will be back in the driver’s seat again this week, so batten down the hatches, and don’t look at the markets…
 
For What It’s Worth… Here we go again, with JP Morgan’s metals traders being sued in court for price manipulation, using spoofing… This time it’s the former head of the metals trading unit at JP Morgan… This article can be found here: JPMorgan’s ‘Big Hitters’ of Gold Market Face Trial Over Spoofing – BNN Bloomberg
 
Or, here’s your snippet: “Michael Nowak was once the most powerful person in the gold market.
 
The former JPMorgan Chase & Co. managing director ran the bank’s precious metals business for more than a decade, making hundreds of millions of dollars in profit trading everything from silver to palladium. Now, he and two of his former colleagues face a federal jury in Chicago on criminal charges for thousands of so-called spoofing trades, which prosecutors say were used for years to generate illicit gains for JPMorgan and its top clients.
 
The trial, slated to kick off Thursday, threatens to lay bare the inner workings of the prestigious bank that has long dominated the market for gold. The government says Nowak’s business operated as a criminal enterprise, manipulating prices from 2008 to 2016 by placing thousands of trade orders that were never intended to be executed. If convicted, the three men are among the biggest players yet to face prison for price manipulation.
 
“These are big hitters,” said Robin Bhar, a former metals strategist at Societe Generale SA who spent more than three decades in the industry. “Coming to court gives it a lot more transparency in what is a very opaque market.”
 
The trial comes after years of a US government crackdown on price manipulation that saw JPMorgan pay $920 million to settle spoofing claims two years ago. With $330 billion of notional value in precious metals derivative contracts at the end of March, the New York-based bank accounts for 67% of the positions put through US banks. It holds three times as much as the next-biggest player, Citigroup Inc., data show.”
 
Chuck again… Why on earth is JP Morgan allowed to continue to be in the metals business? The Regulators should have shut this unit down years ago! Oh, I know the answer to that question, but many of you have argued with me through the years as to how I could come up with that? But for those of you new to class that haven’t heard this, here goes: The U.S. Gov’t is behind the price manipulation of Gold & Silver. They can’t be seen doing the trading, so they employ the Bullion Banks, such as JPM to do their trading, and in return they will look the other way when questions arise…
 
Market Prices 7/11/2022: American Style: A$ .6772, kiwi .6131, C$ .7683, euro 1.0085, sterling 1.1983, Swiss $1.0189, European Style: rand 17.0213, krone 10.2084, SEK 10.6105, forint 405.08, zloty 4.7600, koruna 24.3815, RUB 62.09, yen 137.18, sing 1.4092, HKD 7.8496, INR 79.43, China 6.7111, peso 20.61, BRL 5.2569, BBDXY 1,287.56, Dollar Index 107.79, Oil $101.86, 10-year 3.06%, Silver $19.19, Platinum $877.00, Palladium $2,130.00, Copper $3.50, and Gold…. $1,734.63
 
That’s it for today… The super hot temps left us for Saturday and Sunday but are expected back today! There will be no Pfennig tomorrow, as it will be a travel day for me, but I’ll talk to you again from S. Florida on Wednesday… Don’t forget though that the next two weeks after this week, I’ll be on my annual summer vacation. The Phillies wrap up their 4 game series here tonight, an then the Big Bad Dodgers, everyone’s favorite to win the National League, come to town. The Cardinals named to the All-Star Team, are: Paul Goldschmidt, Albert Pujols, Nolan Arenado, and Ryan Helsley… So congrats to them… The Cardinals Tommy Edman was the #1 player with the highest WAR rating before his recent slump, and he didn’t make the All-star Team… Hmmm…. The Great Percy Sledge takes us to the finish line today with his song: When A Man Loves A Woman… I heard Percy Sledge sing that song a year ago, after all these years he still hit every note! I hope you have a Marvelous Monday today, and please remember to Be Good To Yourself!
 
Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts