The Dollar Starts 2017 With Strength..

* Will dollar rinse & repeat again this year?
* China prints strong Caixin PMI.
* Singapore prints strong 4th QTR GDP!!
* Was German Gold just paper claims?.

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

Good Day. And a Tom Terrific Tuesday to you! And Welcome to January and 2017! Happy New Year! Let’s get this year started on the right note, eh? Now what would that be? For each person it would be a different note, right? For me, it would be getting the year started with a much better outlook for health. So state your note, and work toward getting it played! How about that Winter Classic game that was played at Busch Stadium yesterday? How cool was that, especially for me, because I watched it on TV, in the dry, warm house! HA! The Amazing Rhythm Aces greet me this morning with their 70’s song: Third Rate Romance. (I bet you don’t have that one on your playlist!)

Well, we start 2017, much like we have for the past several years, with dollar strength. The optimism is still strong for the U.S. economy and interest rate hikes. But hasn’t that been the case the past few years only to be disappointed? Well, I just don’t see how this year will be any different. I know, I know, the President-Elect is going to turn things around, right? Well, I hope so, but just in case things go awry for him, we might as well be ready to stumble, fumble, bumble, along with the economy having starts and stops. That’s my thought, for what it’s worth.

Not much happened yesterday in the overseas markets that were open. No one wanted to go out on a limb, and I don’t blame them. Going out on a limb is dangerous! Last week, there was little to no real economic data, and this week, we get a week chock-full-o-data, starting today with the ISM (PMI in other countries) Manufacturing Index, which is expected to inch higher.But the key data print this week is the Jobs Jamboree on Friday. So, we have that to look forward to, right? Heh. Regular readers know all too well, that I’ve given up on the BLS and the Jobs Jamboree, and prefer to not care about it any longer. the markets do, however, and therefore I have to talk about it. UGH!

The price of Oil has bumped higher to trade with a $55 handle this morning. It’s January, so the production cuts of the OPEC members are supposed to be starting, and the first reports have a couple members adhering to the proposed cuts. So.. so far, so good.. I was reading my friend, John Mauldin’s letter yesterday, and he mentioned that he was told that the U.S. Shale producers have found new technology that allows them to lower their costs of production. I wondered when that was going to happen, given how so many of them were hurting. Desperate times call for desperate measures, right?

So.. if the U.S. shale producers can get back to pumping out large quantities of crude, then, if I were king, I would slap huge tariffs on imported Oil. For we don’t need it! But I’m not even your last pick as an Oil man, so I’ll let that alone for now, and maybe come back to it another day..

Well, there was some data this past weekend that printed in China. Caixin PMI easily beat the expectations with a print of 51.9 (50.9 expected). The Caixin PMI is different from the official PMI from the Gov’t.. That series measures output at the huge, state-owned manufacturers, while the Caixin version looks at the smaller, private or semi-private enterprises. Taken together with the most recent service sector surveys. So, looking at this from the cheap seats, it looks to me as though China’s economy is on reasonable footing. But it’s got a dark cloud hanging over it, in the form of the U.S. President-Elect, who is being more critical of China than previous administrations.

This upbeat report that printed in China, gave the Aussie dollar (A$) a reason to rally, but in the whole scheme of things, the rally lasted a short time, and is now history.. The same goes for kiwi, which attempted to grab onto the A$’s coattails but couldn’t hold on for long.

The Japanese yen is back to getting sold like funnel cakes at a State Fair while they are still on holiday, and yen has a 118 handle this morning. And that’s helping push the Dollar Index to new cycle highs this morning. The euro will see German CPI print this morning, and ahead of that print, the euro is seeing some selling, and has just dipped below 1.04. I taking a stab at this CPI print that will probably print before I hit “send” today, but for what it’s worth, I think German CPI will surprise on the upside, because of the higher Oil prices. And that could get the single unit back above 1.04 today.

In Singapore this past weekend, they printed their 4th QTR & Annualized GDP and both beat expectations on the upside! 4th QTR GDP printed at 9.1% VS the 3rd QTR, and the annualized GDP print was 1.8%.. Like I said, both better than expected. GDP got a HUGE boost from the manufacturing sector after spending most of the year in the red, manufacturing printed a nice quarterly gain of 9.4%.. So, what changed for Singapore’s manufacturing in the 4th QTR? Well, global growth saw a tiny pick up of activity in the 4th QTR, that’s the only thing I can think of. So, it will be important for Singapore to follow this print up with a strong print in the 1st QTR of 2017, but I’m not keeping any light on for that to happen, as I said above, I ‘m just not that excited about the prospects for 2017. But the Singapore dollar wasn’t allowed to rally on the print, given the weakness in the Chinese renminbi.

Speaking of the renminbi. China announced new measures to slow down the outflow of funds from China. Violators of foreign exchange rules will be denied currency quotas for three years and will be investigated for money laundering, according to the State Administration of Foreign Exchange. Hmmmm. Interesting, eh? Reminds me of the line in the song Hotel California. “you can check out any time you like, but you can never leave!” And here’s an article on this if you should want to read it, click here: https://www.bloomberg.com/news/articles/2017-01-03/china-drills-down-into-forex-transactions-as-money-exits-abroad

And did you hear about what they are trying out in Finland? They are testing the “universal basic income” thought. They picked 2,000 people to receive about $600 a month no matter what their financial situation is.. Wait, what? Yes, 2,000 people will receive about $600 per month going forward, to see how the recipients deal with the funds. What’s next? Free lunch?

And brother has that decision by Indian PM Modi to take out of circulation the 1,000 and 500 rupee notes been a bad decision. The best laid plans of man and men, right? You see, when the announcement was made that the Gov’ was taking out these two denominations of rupee notes, the Indian people were given a time frame to take their notes and deposit them in the bank, or when the time was up they would become worthless. The problem as I understand it comes from the fact that millions of Indian people don’t have bank accounts! And now the economy is beginning to slow down because of all the chaos that has taken place since the announcement. This has been a disaster for the Indian Gov’t and PM Modi, in my opinion. I understand he was attempting to clean out the underground economy of India, but this plan has backfired, and now what will he do?

Well, Gold ended the year on a sour note, getting sold by $6.80 on the last day of the year. I received an email from the GATA folks over the weekend, and in it Peter Boehringer, Founder of the German Precious Metals Society, states that Germany’s Gold reserves in the U.S. were only paper claims. WOW! OK, I’m not saying one way or the other that this is true or untrue, all I’m going to say is that IF it is true, then it makes perfect sense why Germany was denied when they first requested their physical Gold held in the U.S. back in 2013. Right?

And would open Pandora’s Box of questions regarding all Gold holdings at Central Banks wouldn’t it? So. I can see why this article that was in the German new agency DPA-AFX was printed at Christmas time, so that maybe it would fly under the radar. Oh, and by the way, Germany did receive more of their physical Gold recently, bringing their total repatriated to almost 50%.. What’s taking so long? That’s a discussion for the Butler Patio.

Well, that pretty much sums up the goings on yesterday and today. We have to restart the engines that have sat idly by for the last 3 days, and then once everyone is in their places with bright shining faces, we can get back to normal in the markets. Well, as normal as can be I should say! So, let’s head to the Big Finish!

To recap. The dollar starts the year 2017, like it has the past few years, with dollar strength. will that dollar strength continue? Or will we revert back to previous year’s performances, with the dollar stumbling and fumbling the ball as we get into the meat of the month? China printed a nice strong Caixin PMI over the weekend, and that helped the A$ and kiwi for short time. Singapore printed a strong 4th QTR and annual GDP over the weekend, but with the renminbi still down, the Sing dollar wasn’t able to amount much of a rally on the strong GDP print. The euro lost all the short-term gains it made on the algorithm trades from Friday (we talked about that, for a redo, go to www.dailypfennig.com ) And this Friday is a Jobs Jamboree, and Chuck has his hands in the air, and just doesn’t care! HA!

For What it’s Worth. This is a cool story. it’s about the completion of the high speed rail that China built connecting East & West. The article isn’t long, but it has some videos that I think you’ll think are cool if you go there and check them out: https://www.rt.com/business/372021-china-longest-railway-launch/

Or, here’s your snippet: “The 2,264-kilometer Shanghai-Kunming rail line runs across the five provinces of Zhejiang, Jiangxi, Hunan, Guizhou and Yunnan. It cuts the travel time from Shanghai to the capital of Southwest China’s Yunnan province Kunming from 34 to 11 hours.

According to train driver Wang Jinda, the trains can travel at speeds up to 330 kilometers per hour.

In 2012, China started operating another high-speed link, the 2,298-km Beijing-Guangzhou line which stretches north to south.

Chuck again. That’s pretty cool stuff! You’ve gotta love it!

Currencies today 1/3/17. American Style: .7205, kiwi .6917, C$ .7445, euro 1.0405, sterling 1.2277, Swiss $ .9720, . European Style: rand 13.7585, krone 8.6625, SEK 9.1611, forint 297.20, zloty 4.2265, koruna 25.9742, RUB 61.25, yen 118.20, sing 1.4502, HKD 7.7558, INR 68.27, China 6.9440, peso 20.72, BRL 3.2608, Dollar Index 103.23, Oil $55.03, 10-year 2.50%, Silver $15.92, Platinum $906.04, Palladium $683.55, Gold $1,154.84, SGE Gold. $1,185.35

That’s it for today.. Well, how was your NYE? I had a nice time, had a great dinner at my fave restaurant on The Hill here in St. Louis, with friends. I didn’t feel very good though, in fact when asked how I was feeling I responded, “like death warmed over”.. But I soldiered through and even made it midnight! The NFL playoffs are set, and start this coming weekend. I guess I’ll have to start watching the whole games now, as I usually watch the RedZone only. Little Braden and his dad came over yesterday to watch the hockey game with me. Braden was very excited that Tarasenko scored two goals, because that’s who’s jersey he wears! I call him Tarasenko, and he says, “I’m not Tarasenko, I’m Braden” I missed a couple of office birthdays over the weekend, so sorry about that! I’m still coughing and causing me to not sleep. UGH! But the days are getting better, 10-days, 2 weeks, it has to run its course. The Gin Blossoms take us the finish line today with their song: Until I Fall Away.. And with that I hope you have a Tom Terrific Tuesday.. Be Good To Yourself!

Chuck Butler
Managing Director
EverBank Global Markets
Editor of A Pfennig For Your Thoughts
1-800-926-4922
https://www.everbank.com