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The Euro Shoots Higher On Algorithm Trading.

* Dollar is softer to end the year.
* China changes basket of currencies.
* New Budget Chief is a Gold-Bug!
* Trade Deficit widens again!.

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

Good Day. And a Happy Friday to one and all! Well, here we are. The last trading day of the year. And tomorrow we’ll say goodbye to 2016. This is where I get sappy about the past year, that has brought me through the gauntlet of cancer once again. Next June, it’ll be my 10 year mark of being diagnosed with Stage 4 metastatic renal cell carcinoma (kidney cancer). I’ve been very lucky to be still around. I’ve had good doctors, good medicines, good support, and the prayers and thoughts of thousands of people. I also think that my attitude toward the whole things plays a part in this. I said, and told you dear readers in the first notice to you that I had cancer, that I would beat this. Well, I haven’t beaten it, but I’m still in the ring with it, and we’re slugging it out! This morning, I’m going to do something that I’ve never done before. I’m giving you a link to a YouTube video of Lisa Lambe of The Celtic Women singing Auld Lang Syne. This is the best recording of this old song that I’ve ever heard. So, if you want to say goodbye to 2016, and hello to 2017 with a song, click here:

I’m still coughing like a 6-pack a day cigarette smoker, and I’ve come to the realization that it’ll have to take its course 10-days to 2-weeks. That’s the normal time for these things to get through my system. I’m sitting here at my writing desk at home, and I look up and see a picture on the poster board in front of me of me holding my oldest son, Andrew, when he was just a toddler, at the World Series Championship Parade in 1982. A nice memory, for sure!

OK. Well, for what seems like once in a blue moon, Gold had a good day yesterday.. Not just a couple of bucks of gains, but $16 worth of gains! And there were no after trading hours shenanigans that went on. So, we had a clean day of trading, and Gold shined. I think back to last year, when the Fed hiked rates in December, and then in January Gold took a ride on the rally train, when most observers thought Gold was going to have another bad year, because of the rate hike and the Fed’s statement that they would hike rates 4 more times in 2016. Could 2017, be a rinse and repeat of 2016 for Gold? It sure begs one to at least think about it, doesn’t it?

Oh! And don’t forget! This Sunday, my currency of the month article will be on Gold. The true currency.. So, be sure to open it up and read it when you see it in your email box on Sunday! And if you don’t like reading it there, go to the Pfennig’s website: and read it there! I know, I know, that’s a shameless plug. but my dad taught me years ago, that sometimes you have to blow your own horn.

The dollar remained soft yesterday throughout the day, and the overnight markets. The euro got a BIG BOOST overnight in Asia, as the trading algorithms trumped the thin markets, and the euro shot up 1.6% in a matter of minutes. Starting just under 1.05, the euro shot up to 1.0653, as the buys trades snowballed, and caused some traders holding short positions to take losses. Aww, poor traders, don’t you feel sorry for them? I don’t! Oh well, the euro has settled back down now, but has held 1.0560, which is still a nice boost from yesterday’s 1.0475, eh? This is the stuff I talk about whenever we get around a holiday, and the markets get thin with volume, and liquidity dries up. We can see wild swings, and this is one of those times, nothing more, nothing less.

There was BIG News overnight from China. The Chinese have decided to expand the basket of currencies they use to value the renminbi. The old basket consisted of 13 currencies, that most people believed to be the major currencies of the world. The new basket will have 24 currencies, and they include currencies from: S. Africa, S. Korea, Arab Emirates, Saudi Arabia, Hungary, Poland, Denmark, Sweden, Norway, Turkey, and Mexico.. One would think that China was doing this to reduce the weighting of the dollar in the basket, but as of right now, the dollar’s weighting only sees a slight reduction. The change could come later, but right now, that’s how it sits. I would suspect that the Chinese would make this weighting change at some time, and do it stealth-like. We may never know they did it. The biggest reduction in the weightings is being applied to the euro.

But good for these new 11 currencies, for they will be highlighted as part of the Chinese valuation basket.. But looking at the renminbi’s performance this year, I have to say that I’m very disappointed in China’s ability to deal with their recession. I always thought that they would be so “old school” and let things be, and if they needed to apply attention to a sector they would do so with a bazooka, and not a pea-shooter.. Well, none of that happened, and they are still mired in a recession, with capital flowing out of the country at a pace that’s scary. I told you yesterday, that I still believed that the Chinese would devalue the renminbi again in retaliation of the Fed’s rate hike. And I still think that, but in meantime, I do believe that renminbi will move above the 7 handle in 2017, and that will be quite significant/ psychological to the markets.. So watch for that..

Well, do you wanna see a direct reflection of all this dollar strength? You do? Great! Well here it is! The U.S. Trade Deficit rose 5.5% in November from Rocktober to $65.3 Billion! Imports rose, and exports declined. That’s a bad combination there folks.. And as long as we have this dollar strength, the Trade Deficit is going to print badly each month. Why is this important? Well, the Current Account is comprised Trade Balance and net income from abroad and current transfers.. I read a report last year, where the writer, got on his soapbox and screamed that the Trade Deficit doesn’t mean a hill of beans.. I just laughed and laughed throughout the whole article..

And the Current Account is an important indicator about an economy’s health. Yesterday, I talked about 1985, and the Plaza Accord, where Finance Ministers from around the world met at the Plaza Hotel in NYC, to discuss the direction of the dollar because it had gotten too strong, and the U.S.’s Current Account Deficit to GDP ratio was 2.5%.. We’ve been as high as 6% in 2006, and according to the Gov’t we are currently at 2.7%.. . I doubt that seriously, folks.. .The Gov’t must be using a GDP number that we don’t know about! HA!

Well, the saber rattling between the U.S. and Russia has begun. We kick your guys out, you kick our guys out.. I did like what I heard the other day from President-Elect, Trump, that he favored moving past the economic sanctions on Russia. I’ve said this more than once in the past couple of years, and that is, if the economic sanctions were removed from Russia by the U.S. and Eurozone, the Russian economy would be strong. So, let’s look forward to the President-Elect dropping the sanctions, and then the Eurozone would drop them too. One would have to think that the ruble would trade accordingly should that happen… Of course that’s just my opinion and I could be wrong.

The price of Oil has held steady Eddie right around $54 give or take a buck or two either direction. And the yield on the 10-year Treasury has fallen this week and is back below 2.50% this morning at 2.48%.. Should this reduction of yield continue as we make our way through the first week of 2017 I would think that the bond boys don’t believe the Fed is going to hike rates 3 times in 2017.. .But, if this is a false dawn, and yields get back ratcheting higher next week, then obviously the opposite will hold true.

I haven’t really had a dog in the hunt, or an axe to grind regarding any of the new cabinet members that have been named by the President-Elect., except one.. the man that was named the head of the Office of Management and Budget (OMB).. The new Budget Chief, Mick Mulvaney, has been an active investor in Gold and Gold-Mining stocks.. According to an article on Bloomberg , Mulvaney has accused the Federal Reserve of debasing the value of the greenback..

So, we have a Gold-Bug as the Budget Chief. That’s interesting don’t you think?

The U.S. Data Cupboard only has the Chicago area PMI for December to print today.. So, once again, there’s not much here to look at, just move along. Next week, we’ll start the year with a fresh sheet of paper to track data.. of course all of it will be backward looking, but we’ll have to close out 2016 first.

To recap.. The dollar heads into year-end on a softer note, Gold has a chance to have its first weekly gain since before the U.S. election, the price of Oil remains steady Eddie around $54, and Treasury yields have dropped this week, what gives there? China announced that they are adding 11 currencies to their basket they use to fix the price of the renminbi each day. And the euro got caught up in algorithm trades in a thinly, illiquid market overnight, and shot up 1.6% before backing off a little.

I don’t have a FWIW for you today.. I searched and searched, and there was nothing “worthy” to bring to you today.. I guess that’s a good thing, for this is the last day of the year, time to start to celebrate, and we don’t need any gloom and doom stuff to drag us down! HA!

Currencies today 12/30/16. American Style: A$ .7226, kiwi .6940, C$ .7418, euro 1.0560, sterling 1.2315, Swiss $.9824, . European Style: rand 13.6960, krone 8.6050, SEK 9.0752, forint 293.89, zloty 4.1890, koruna 25.5827, RUB 60.41, yen 116.82, sing 1.4440, HKD 7.7536, INR 67.85, peso 20.72, BRL 3.2696, Dollar Index 102.19, Oil $53.99, 10-year 2.48%, Silver $16.21, Platinum $912.00, Palladium $673.75, Gold $1,160.13, and SGE Gold. $1,175.09

That’s it for today.. Shorter than usual today, but hey! I gave it everything I had! Well, our Blues will be featured this weekend in hockey, as the Winterfest will be here in St. Louis, and the outdoor hockey game will be played on Monday at Busch Stadium. The Alumni members of the Blues and Blackhawks will play an “old geezers” game this weekend on the Busch stadium ice.. 44 days until pitchers and catcher report to spring training.. I’m very disappointed in my beloved Cardinals once again this offseason. Yes, they made a good deal signing a new center fielder, but they need a 4th place hitter that bops home runs! If I can see that, I don’t see how the Cardinals brass can’t see that! UGH! Great! Now I’m yawning and tired! But at 2 am I was as sober awake as a priest! UGH! I go to the oncologist one more time in 2016 today, then I switch to my oncologist in Florida next week.. I’ve got to get off these steroids they are making me feel like someone is pumping me full of air! UGH! Alrighty then.. The Counting Crows take us the finish line today with their song: Round Here.. And I thought I would give you the lyrics to Auld Lang Syne, so go out and have a Fantastico Friday, and very Happy New Year! Be Good To Yourself! Talk to you next year!

Should auld acquaintance be forgot,
And never brought to mind?
Should auld acquaintance be forgot,
And days of auld lang syne?
And days of auld lang syne, my dear,
And days of auld lang syne.
Should auld acquaintance be forgot,
And days of auld lang syne?

We two have run about the braes
And pu’d the gowans fine.
We’ve wandered many a weary foot,
Sin’ auld lang syne.
Sin’ auld lang syne, my dear,
Sin’ auld lang syne,
We’ve wandered many a weary foot,
Sin’ auld lang syne.
We two have sported i’ the burn,
From morning sun till dine,
But seas between us braid have roared
Sin’ auld lang syne.
Sin’ auld lang syne, my dear,
Sin’ auld.

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

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