Trump And Xi Are Buddies Again!

A Pfennig For Your Thoughts

July 1, 2019

*The overnight markets haven’t been kind to the currencies & metals
* The RBA cuts rates…

Good Day… And a Marvelous Monday to you! Pfennig tradition calls for this today… There I was on a July Morning… I was looking for love… With the strength of a new day dawning, and a road of my own… Welcome to July! I didn’t realize this last week, when I shortened the week with my appt. on Thursday… But this week will also be a short week, as the 4th of July will be on Thursday this week… So… Yay for me, eh? My beloved Cardinals finally found a way to score more than 1 or 2 runs a game yesterday. It did take them extra innings to win, but Hey! They’re not much of a team other than a .500 team, so any win is a good one! Alex came home on Friday after being away from home for 10 weeks, as he completed a clinical in Montgomery, Alabama. He begins another one immediately, but this one is near to hear, so, no biggie… A few of us celebrated Alex’s 24th birthday on Friday… How many of you remember when he was 3 and would help me write the Pfennig, and it looked a lot like this: !$##3456*^&^! Ah… Good memories of when he and I were so close and I’ll never forget watching his favorite shows on TV with him in 1998, during my “first retirement”… REO Speedwagon greets me this morning with their song: Golden Country…

Well, Friday, it was announced that Trump and Xi are friends again, and have ironed out their differences that created a Trade War with China… I find this very difficult to believe that all’s well here, but if that’s what the two leaders want us to know… Then so be it! The damage to the U.S. economy has already caused the Fed to talk about rate cuts, instead of rate hikes, so that’s not a good thing, as far as I’m concerned… Yes, I told you that the Fed would be reversing itself, but I didn’t think it would take this long for them to do so!

So… the China / U.S. announcement on Friday didn’t change the currency levels much, and Gold only lost 30-cents on the day… So, to me, I look at this reaction, as the markets didn’t believe an agreement was reached either! President Trump then went onto N. Korea to meet his BFF Kim, and Trump became the first sitting president to set foot in N. Korea since who knows when! The great negotiator, they’ll be calling Trump soon… Not the opposing party, of course, but his own people…

But… in the overnight markets, the removal of the safe havens has begun to take place… Gold is down big in early trading, and the euro has slumped, along with the Japanese yen VS the dollar… So… Maybe after a little arm twisting, the markets now agree that the Trump / Xi deal is real…

Well… The Reserve Bank of Australia (RBA) became the first Central Bank to cut rates in 2019 last week… The RBA was driven to cut rates, because of the slowdown in China due to the Trade War with the U.S. I wonder if the RBA would have liked to have waited until this past weekend’s meeting between Trump and Xi took place before they cut rates… But they didn’t, they went ahead and cut 25 Basis Points from their internal rate, which now stands at 1.25%…

The Aussie dollar (A$) traders liked the news at first and ran the A$ above 70-cents on Friday, but like everything else it has succumbed to the overnight markets and their buying of U.S. dollars… I have to tell you though, when I saw that +70-cent level on the A$ I thought it looked very good…

So, last week I thought that the dollar was going to be looking for a comfortable place to hang out in the woodshed, for it would be there for sometime… And then along came a spider and… well you know what happened, the powers that be rushed to the dollar’s aid, and now, this week, it looks like the dollar will avoid being sent to the woodshed for any prolonged period…

The price of Oil is higher this morning and is trading with a $60 handle… How much longer will this last could be a question for our friends at OPEC (NOT!) and their decision to maintain the cuts in Oil production for longer… Other than that, we’re in that same old cycle for the price of Oil… It bumps higher, the shale producers jump in, flood the markets with supply and the price goes back down, and the shale producers bow out again… Lather, rinse and repeat…

I wonder what the dollar bugs will think when they hear this news….
There’s a rumor going ‘round, someone’s underground, no wait! The rumor I’m talking about is that a major U.S. Bank will fold in the near future… This from the folks at Agora, who have never been known as publishers that pull back punches! Remember when the folks at Agora told us that GM would collapse along with Fannie and Freddie back in 2007? And then ithose things all happened? Well, they won’t tell us what major bank is on the ropes, unless we sign up for a year subscription, but to me, just knowing that a major bank is teetering with all their derivatives, is scary enough! I don’t know about you, but I’m scared about what will happen here…

Last week I told you about how the Hong Kong Dollar / honker was on the rally tracks, which looked very weird to me, but this was happening while the people of Hong Kong rioted in the streets…

Reuters.com had a good piece on why the riots are happening this weekend, so let’s listen in… “More than a million people have taken to the streets at times over the past three weeks to vent their anger and frustration at Hong Kong’s Beijing-backed leader Carrie Lam, posing the greatest popular challenge to Chinese leader Xi Jinping since he came to power in 2012.

Opponents of the now-suspended extradition bill, which would allow people to be sent to mainland China for trial in courts controlled by the Communist Party, fear it is a threat to Hong Kong’s much-cherished rule of law and are demanding it be scrapped and Lam step down. “
I’m still of the belief that the honker’s rally won’t be a long lasting thing, so we shall see…” – Reuters

I guess we’re back to square one with regards to a currency and metals rally taking place. And so our attention will be switched from looking for news on the Trade War, to watching the data prints this week… Of course this week will be shortened with the Independence Day holiday on Thursday, which means all the senior currency and metals traders won’t be in on Friday, as they’ll make a 4-day weekend with a trip to the Hamptons!

I’m surprised though that the monthly Jobs Jamboree will still happen on Friday… I would have thought with the markets being so thin that day, that the powers that be would delay it to next week… But that’s not the case, and so on Friday this week the Jobs Jamboree featuring the June payroll numbers will take place.

We start the data roll call today with the June ISM Manufacturing Index, which at the end of May was showing some weakness and it stood at 51.3, which the Markit version of the data showed manufacturing teetering at 50.1… The ISM is primed to fall further, after all the regional reports have been very negative, so we shall see…

In addition to the Jobs Jamboree on Friday, we’ll also see the most recent Trade Deficit (look for a jump higher), Factory Orders (a real piece of economic data) and the auto sales for June… All could end up being market moving should they expose the economy even more…

To recap… Trump and Xi are buddies again, and Trump is visiting his BFF, Kim, in N. Korea… All these pleasantries have turned the currencies and metals around, as the safe havens are being removed and the dollar bugs come back out to play. Gold, which lost 30-cents on Friday, is down nearly $20 in the early trading this morning. And the euro has slipped further down the slippery slope. The RBA was the first central bank to cut rates in 2019… Will the Fed be right behind them? Inquiring minds want to know! HA!

For What It’s Worth… I told you last week that Trump was turning the Trade War to a Currency War… He’s doing this by putting pressure on the Fed to cut rates and make the dollar less appealing… thus weakening… And this article from Bloomberg.com highlights this ongoing argument between the President and the man he nominated to be the Fed Chairman, and it can be found on Bloomberg.com…

Or, here’s your snippet: “President Donald Trump wants a weaker dollar to help boost exports, and is counting on the Federal Reserve to help make that happen. But the central bank’s chairman, Jerome Powell, has made clear it’s not his job.

It’s a new twist in the broader pressure campaign the president has brought to bear on Powell to cut interest rates to energize the stock market and fuel growth.

Trump’s focus on the dollar surfaced last week after the European Central Bank said it might ease policy, prompting the euro to drop against the dollar. Trump seized on the move to say on June 18 that the Fed’s failure to lower rates was putting U.S. exporters at a competitive disadvantage. He later mused on June 26 he’d rather have ECB President Mario Draghi running the Fed.

Powell, once again, is finding himself on the defensive, trying to shield the Fed from political influence. He deflected Trump’s calls back at the administration.”

Chuck Again… Well, the Fed Chairman is right here on this subject, but on the other hand he’s totally wrong in his attempt to keep the stock market afloat… Neither of these two directives are in his job description… I’m just saying…

Currencies today 7/1/19 American Style: A$.6995, kiwi .6704, C$ .7630, euro 1.1325, sterling 1.2627, Swiss $.9838, European Style: rand 14.1408, krone 8.5490, SEK 9.3087, forint 284.93, zloty 3.7455, koruna 22.4768, RUB 63.19, yen 108.25, sing 1.3547, HKD 7.8080, INR 69.01, China 6.8655, peso 19.16, BRL 3.8469, Dollar Index 96.54, Oil $60.06, 10-year 2.02%, Silver $15.26, Platinum $834.54, Palladium $1,530.89, and Gold… $1,390.17

That’s it for today… A great big belated Happy Birthday to youngest son, Alex who turned 24 this past weekend… On Friday last week, I attended a retirement party for 2 former colleagues: Ty Keough and Mary Vance… It was great seeing most of the folks again… At one point in the proceedings someone mentioned that I had hired them, and I looked around the room and said, “well, I think that I hired nearly everyone one in this room!” And that got a big laugh… OK, Alex is home… Kathy comes home today… The house won’t be so quiet any longer, but that’s OK… It was becoming too quiet! So… memo to Christine and Jen… That was two weeks alone for me, and I’m still standing, as Elton John sang… Ok… The great Otis Redding takes us to the finish line today with his song: I’ve Been Loving You… This was from his live from the Whiskey A-Go-Go recordings, from many years ago now… I hope you have a Marvelous Monday… Welcome to July, and Please Be Good To Yourself!

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