The Fed’s LMCI Drops For 2nd Consecutive Month!

* Currencies rebound yesterday.
* Risk Sentiment dissipates.
* China’s Trade Surplus narrows!.
* RBNZ & BOC meet tomorrow..

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

Good Day. And a Tom Terrific Tuesday to you! Peter Gabriel greets me this morning with his song: In Your Eyes. Peter Gabriel was the original lead singer of the group Genesis, who had moderate cult-like success with him, but when he left the band for a highly successful solo career, the band now with Phil Collins singing took off! This all occurred during the height of MTV’s video playing, so people were inundated with songs from both on the radio and TV! It took me quite a few years before I could listen to either performer again.

Well. As the day went along yesterday, the currencies fought back against the dollar, and some won some ground back that was lost in the early morning trading. The euro has firmed again, and is trading above 1.10.. We’ve seen these attempts to “firm” in the past couple of years, only to have the euro thrown under a bus by European Central Bank (ECB) President, Mario Draghi. And just on cue, the ECB will meet on Thursday this week. Yesterday, I told you how the euro was getting sold because of fears that Draghi and the ECB would announce additional stimulus. Well, that fear didn’t just go away. The wolf is always at the door for the euro. So enjoy the 1.10 handle while it’s there.

The overall “risk sentiment” that I talked about last week, doesn’t seem too hip this week. The overnight markets whack the antipodeans, and then they spend the day trying to win back lost ground. The dollars of Australia (A$) and New Zealand / kiwi, are both on the selling blocks again this morning. Both of these currencies had seen the renewed “risk sentiment” that existed last week, as a catalyst for some strong moves higher, but that was last week, and this is this week, and this week the “risk sentiment” has dissipated.

The Reserve Bank of New Zealand (RBNZ) meets tomorrow. And the markets are pretty sold on the idea that the RBNZ will cut rates at this meeting. And that too, is giving kiwi a tough row to hoe this week. And the same idea is carried over to the A$… Even though the Reserve Bank of Australia (RBA) left rates unchanged last week, the rate cut flag wavers are shouting about a rate cut at the next RBA meeting. I just don’t get these guys. they leave me shaking my head in disgust, and wonderment that they made it in life this far! There! I said it! They are not worthy! (remember Wayne and Garth, bowing down to Madonna, saying we’re not worthy, we’re not worthy?, now that’s funny stuff!)

The Chinese renminbi was allowed to appreciate again last night in the daily fixing. Another larger than the average fixing for the renminbi last night. And that appreciation was in the face of some weak trade figures that printed for China last night. China did have a February Trade Surplus (that’s a good thing), but it was only $32.6 Billion (that’s not so good, considering the consensus thought was for a Trade Surplus of $51 Billion). Chinese exports fell 25% year on year, the fastest pace of decline since 2009. And it’s not a strong renminbi causing the exports weakness. It’s the general slowdown of China’s trade partners. With the major partners being: The Eurozone, Japan, and the U.S. all in an economic funk. Still no major announcements from the Chinese Premier Li, regarding what was discussed at the Annual Meeting last weekend.

The Bank of Canada (BOC) meets tomorrow to discuss rates. I’m getting concerned about the Canadian dollar / loonies recent strength. On January 19th, less than two months ago, the loonie had fallen to a cycle low of .6859. Today, the loonie is .7488.. Now that’s a nice, less than two-month run for a currency, eh? But here’s the thing. And I know I’ll sound like a broken record here, as I’ve said this on more than a few occasions, but BOC Gov. Poloz, comes from the trade side of Gov’t, and trade side guys are always clamoring about the need for a weaker currency to help their exports.. So, when Poloz was named Gov. of the BOC, I said that when it came to push and shove, he would return to his roots, and go with what would weaken the loonie. Tomorrow, we’ll get a glimpse of what Poloz is truly made of. And I think that with the loonie going on a recent surge higher, that has got to enter into the discussion at the BOC tomorrow.

The price of Oil has climbed up the ladder to the next rung, and now has a $37 handle. But none of the petrol currencies are taking advantage of this latest step higher for the price of Oil. IF. The price of Oil can somehow keep climbing the ladder to the $40 rung, I would think that the petrol currencies traders would take notice and trade currencies like the ruble, real, krone and loonie with respect! R-E-S-P-E-C-T All I’m asking for when you get home!

Under the heading of Things Just Aren’t That Peachy (TJATP) Well, want some more proof that the whatever jobs were actually created in February weren’t bread winner jobs? The Fed’s very own, LMCI (Labor Markets Condition Index) fell 2.4 points in February, the largest monthly drop since 2009, despite the so-called strong job growth during the month. And before we go on, January’s original estimate for a 0.4 pts gain, was revised downward to -0.8. So two consecutive months a negative wage growth, according to the Fed’s very own Index!

It’s not the kind of stuff that wage inflation, which is what the Fed wants to see, is made of, folks. But, don’t get me wrong here, The Fed is NOT going to let something like a lack of wage growth stand in the way of their appointed rounds of rate hikes. I know, I told you last week that basically everyone in the markets had put the rate hike on the back burner.. But, I just have a sneaky feeling about this month’s Fed meeting. And don’t forget that I told you at the beginning of the year that I saw the Fed hiking rates in March and June, before having the economy come crashing into their collective laps.

Gold is up $8 this morning, after adding nearly $8 yesterday ($7.90) but could have been an even more impressive move higher, if not for the same shenanigans played by the price manipulators in the afternoon markets. But, like I said last week, let them have their fun, as long as they throw us a bone. And don’t look now but Gold is trading with a $1,275 handle. It wasn’t that long ago, we were agonizing over the fact that Gold couldn’t climb past $1,200 and stay there!

And the U.S. Data Cupboard, is bare today. And yesterday, besides the aforementioned LMCI, the January Consumer Credit (read debt) printed, and I was shocked at how much this figure dropped in the month. From $21 Billion in December, to $10 Billion in January. I think that data is going to give anyone over at the Fed a warm and fuzzy, but then sometimes I wonder.

To recap. Not a lot going on right now, data wise, but it will pick up tomorrow with Central Bank meetings in New Zealand and Canada, and the ECB will meet on Thursday. All should bring a surprise or two to the party. The Fed’s LMCI fell for a second consecutive month, and that confirms what I talked about yesterday, regarding whatever jobs were actually created in Feb. And both Oil and Gold are stronger in price this morning again, as both have been on the rally tracks quite often lately..

For What It’s Worth. Yesterday I spent a lot of time talking about the “faith in numbers reported” and I questioned whether the markets believed the reports. Last week I talked about how the markets had begun to question Central Bank moves. Well, I found this on Reuters, by reading Ed Steer’s letter, and can be found here:

And here’s the snippet. “Financial markets’ shaky start to the year shows they are losing faith in the “healing powers” of central banks, the Bank for International Settlements (BIS) said on Sunday while voicing concerns over sub-zero interest rates and emerging economies.

The Swiss-based organization, which fosters cooperation between central banks in the pursuit of monetary and financial stability, said that recent worries over China’s economy, oil and commodity prices and some European banks had come as fundamental shifts take place in the global economy.

International bank-to-bank lending is contracting for the first time in two years, the use of dollar-denominated debt to drive growth in emerging markets has ground to a halt on a strengthening of the currency that has also served to send U.S. companies rushing to borrow in euros.

At the same time, world growth remains subdued, overall debt continues to rise and negative interest rates in large parts of Europe and Japan suggest that some leading central banks are running low on ammunition to quell market volatility that could pose a threat to the global economy.”

Chuck again. Not much else to add here. So, I’ll just move along.

Currencies today 3/8/16. American Style: A$ .7445, kiwi .6755, C$ .7495, euro 1.1010, sterling 1.4205, Swiss $1.0062, . European Style: rand 15.4060, krone 8.5695, SEK 8.5040, forint 282.20, zloty 3.9320, koruna 24.5765, RUB 72.10, yen 113.10, sing 1.3845, HKD 7.7665, INR 67.34, China 6.5041, pesos 17.83, BRL 3.7965, Dollar Index 97.15, Oil $37.48, 10-year 1.84%, Silver $15.61, Platinum $1,001.13, Palladium $568.15, and Gold. $1,274.17

That’s it for today. Another beautiful day that the ballpark yesterday. This time with my grandsons, who terrorized the people in front of them, until I finally said, OK, let’s leave. (it was the 8th inning, and they had lost interest in the game after the first pitch!) I told their moms that they were too young, but we had some fun with them, and the Cardinals backup players won the game, so all-in-all, it was a good day. the moms and sons go home today, to St. Louis, they are running around here getting their stuff together. The boys were so excited to tell me all about their trip to Disney World, so cute. And the two of them played on the beach yesterday together for hours. I love it when kids can play together without adult’s hovering over them like a helicopter! We sat off to the side, and they played, and played. Well, the wind is howling outside again today. This has been a very “windy winter” down here.Fitz and the Tantrums take us to the finish line today with their song: The Walker. And with that, I’ll get out of your hair for today. Bye, Rachel, Dawn, Everett and Braden. I hope you have a Tom Terrific Tuesday, and be sure to Be Good To Yourself!

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