Weak U.S. Data Stomps The Rate Hike Bugs.

* Strong dollar rally turns sour on weak IP.
* Aussie job report and revision were great!.
* Schäuble gets tough with Greece.
* Gold climbs back above $1,200 .

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

Good day.. And a Tub Thumpin’ Thursday to you! Well, I laid in bed this morning, waking up before the alarm as usual, and thought: Wow, my leg with cellulitis feels better this morning, I wasn’t awakened during the night with pain shooting through the leg, so maybe I’m good to go this morning. Well, then I stood up, and that lovely pain shot through my lower leg, and my hopes sunk to the floor. So, it’s back to my recliner, where I can have my leg elevated, and write the letter at the same time. I’ve become almost recluse like down in my basement this week. I did go outside and sit for a short period last evening, just to get some fresh air, but other than that, I’m just doing what the doctor said to do! Steely Dan greets me this morning with the great song: Deacon Blues.

Well, Front and Center this morning we have a surging Aussie dollar (A$) on the news that the labor report last night kicked some tail, and got traders thinking that the Reserve Bank of Australia (RBA) won’t have to cut rates at their next meeting in May. The A$ is very thankful and happy that it was able to surge on the labor data, because its kissin’ cousin across the Tasman, the New Zealand dollar (kiwi), was closing ranks with the A$ getting to within a cent of parity between the two respective currencies. For those of you keeping score at home, the job creation in March was much stronger than expected (15k) VS the actual of 37.7K. That’s 37,700 folks. and the best part of the employment report was the HUGE upward revision of the previous month’s reported gain of 15.6K, which saw an upward revision to 42K. WOW! The Unemployment Rate slipped to 6.1% from 6.2%, and an expectation of 6.3%!

Now, I’ve said in these pages, so I’m on record of saying long ago that I didn’t think the Aussie economy was in need of any more rate cuts, and this labor data backs that up very nicely. So, the A$ is rallying strong, up nearly 1 full cent. Kiwi is taking some solace in the A$’s strong rally, and adding some value to its price, but certainly not at the same pace as the A$ this morning.

Another thing helping the A$ is what appears to be a firming of the commodities, with the price of Oil rising to a $56 handle, and the all-important price of iron ore rising 2.1%… Now keep it all going and we might have something, eh?

Keeping in the region. there was word overnight that Chinese Premier, Li, was out talking up the renminbi / yuan. And in concert with that talk, the renminbi / yuan was allowed to appreciate again last night. Li told reporters that “China can’t rely on a declining renminbi / yuan to boost exports and doesn’t want further devaluation in the currency. The Government’s stance of keeping the currency stable is very clear, and so the renminbi / yuan will mildly appreciate this year.”

Now if there’s one thing I’ve learned about studying the Chinese over the years is that they don’t’ say stuff to just be saying it. So. Li has said the currency will appreciate mildly this year and so it will be.

Moving North. The Russian ruble finally has taken a step back and put the brakes on its recovery. Most of this is just normal trading, folks, trees don’t grow to the moon, and currencies don’t rally every day, even though nothing really has changed and in fact with the price of Oil rising, the ruble should be basking in the sun. But, let the profit takers have their day, and then we can get back to the task at hand, right? Russian President, Putin, will have his annual call-in show today, and will have to deal with the fact that Russians are growing poorer for the first time since he became president 15 years ago. It’s a good thing he can point to the ruble’s performance since the new year started, otherwise he might have to be doing the old two-step shuffle. No word on a removal of the sanctions on Russia, although there is plenty of talk going around about it.

Now moving Westward, we come to the Eurozone. Here the euro took one to the mid-section overnight but has scrambled back to its feet, after taking the 10-count. The shot to the mid-section came courtesy of German Finance Minister, Wolfgang Schäuble, who told Greek leaders that he was ruling out further concessions and it’s up to Greece to commit to the reforms needed to release aid. The Finance Ministers of the Eurozone and Greece are scheduled to meet on April 24.

On a sidebar. I had a dear reader chastise me for not writing about the Greek stuff every day. Hmmm. I would, if there were stuff happening every day, but there isn’t. like this next week, we don’t have anything on the docket regarding the Greek loan stuff until next Friday, the 24th. And I’m not going to make stuff up just to talk about it. So, I hope that explains my position on this mess without ruffling any feathers.

Last Saturday while I was taking questions at the AAII meeting, I was asked about the currencies that met my criteria for strong fundamentals. I went through a few and then a hand shot up, and wanted to know why I didn’t include Swiss francs. Whoa there partner. He pointed out that the franc had, in the past, gained 4x its value VS the dollar. So, I pointed out that, in the past, there are a lot of currencies that have gained just as much VS the dollar, but you can’t just go on past performance. it’s a good indicator, but you can’t put all your eggs in the past performance basket.

And besides, the Swiss National Bank (SNB) has made it perfectly clear that they do not want franc strength.. Shoot Rudy, they even tried the peg to the euro cross thing for 2+ years before bagging it, because the euro was dropping like a rock off a cliff. I’m not going to sugar-coat this folks. When a country’s Central Bank is adamant about ruining a currency’s value I have no interest in them any longer, until that position changes! But of course the franc will remain underpinned by the fact that it is still considered to be a “safe haven currency”.

Well, did you see the news yesterday regarding who is the country that holds the largest amount of U.S. Treasuries? I know, in reality it’s the U.S. Fed, but foreign country-wise, Japan has passed China. But there’s something about this report that isn’t spelled out, so I’ll do that for you. China has seen their Treasury holding drop for 4 consecutive months (as of Feb) I would say that 4 months is enough to begin thinking that this could be a trend.

The U.S Data Cupboard is taking a breather today, with only the Weekly Initial Job Claims and March Home building data to print. yesterday’s Data Cupboard was a doozy, so let’s go to the tape.

Well, I told you yesterday that Industrial Production (IP) here in the U.S. would be down again, but I had no idea how bad it was going to print. March IP printed at a negative -.6% VS the expectation by the markets of -.3%… So, what does this mean? Well, the way I compute things, using “old math”, IP was one of the sectors that contributed to 4th QTR GDP, but given that January IP was -.4%, Feb was .1%, and March was -.6%, IP certainly isn’t going to help GDP in the 1st QTR of 2015, now is it? And look at Capacity Utilization (CAPU), one of the few forward looking pieces of data we get, it fell in March from 79% to 78.4%… Going the wrong way folks. Can the weakness in the U.S. economy be any more evident than right now?

I continue to believe that after all the revisions have printed, 1st QTR GDP here in the U.S. will have fallen to 1%. You may recall that the 4th QTR GDP was just 2.2%, so this will end up trending the wrong way, and certainly not in any way pointing to a rate hike.

So, the data really shot down the dollar rally that was going on when I hit “send” yesterday morning. Gold was one of the best performers on the day, driving the price of the shiny metal back above $1,200. Gold has added $5 in the morning trading, so it’s all good for Gold today. so far. As we all know Gold can get whacked so badly that it makes us forget it was rallying. And of course we all know what causes the whacking! There are still very smart people out there in the world, that won’t buy-in to the manipulation theory. It’s a free country and we can choose to believe what we want to believe, right? So, I’ll just leave that there.

Before I head to the Big Finish. Well, on a sad note. When a Man Loves a Woman. the classic love song, that Michael Bolton tried to copy, but came nowhere close to the soulful sound of Percy Sledge. Percy Sledge passed away on Tuesday at 74. I would have thought of him being much older, but so be it. When a man loves a woman, can’t keep his mind on nothing else, He’ll trade the world for the good thing he found. Ahhh, what a song.

For What It’s Worth. Well, in a follow up to my previous thoughts on the Chinese starting their competing AIIB (Asian Infrastructure Investment Bank) to the World Bank. The AIIB has gotten off to rousing start, with 57 founding members to the bank so far all signed and ready to go. here’s the link to what I have snippets for in case you want to read the whole article: http://www.upi.com/Top_News/World-News/2015/04/15/China-accepts-57-founding-members-for-new-Asian-Infrastructure-Investment-Bank/6071429103735/

“China-led Asian Infrastructure Investment Bank finalized a list of 57 founding member states on Wednesday.

The announcement came after China accepted the last group of nations that includes Sweden, Israel, Poland and South Africa, reported The South China Morning Post.
Founding members have the right to establish the rules for the bank’s activities. They hold other privileges that will not be available to countries that may opt to join the bank at a later point.

An overwhelming number of South and Southeast Asian nations have also been approved as founding members by Beijing.”

Chuck Again. You know.. The United States and Japan have abstained from joining the AIIB, but South Korea, a key U.S. ally in the region, has agreed to join as a founding member along with Australia, New Zealand, Canada, Britain, France and Germany. I think the U.S. and Japan will rue the day they abstained from joining the AIIB, but that’s far down the road.

To Recap. The dollar rally that was so strong yesterday morning, was turned around when U.S. Data showed more weakness in the economy, thus reducing the amount of rate hike trades on the books. Gold really took off on the weak data, driving past $1,200 once again. Australia printed a current jobs data report that was strong, and a previous month revision that was revised upward even stronger! Talk about the rats jumping ship! The rate cut rats all jumped ship and the A$ was left to surge higher, just when it was looking like kiwi was going to catch the A$… And Schäuble tries to be tough with the Greeks, pushing the euro to the canvas for a 10-count, only to see the single unit scramble to its feet and bounce back.

Currencies today 4/16/15. American Style: A$ .7785, kiwi .7650, C$ .8140, euro 1.0720, Sterling 1.4920, Swiss $1.0380, . European Style: rand 12.0080, krone 7.8040, SEK 8.6510, forint 280.25, zloty 3.7585, koruna 25.6310, RUB 50.08, yen 119.05, sing 1.3530, HKD 7.7515, INR 62.30, China 6.1305, pesos 15.20, BRL 3.0280, Dollar Index 97.95, Oil $55.59, 10-year 1.87%, Silver $16.48, Platinum $1,172.00, Palladium $ 772.63, and Gold. $1,207.45

That’s it for today. A nice bounce back win for my beloved Cardinals last night. And they finish the series with the Brewers in a matinee game today, that I can’t go to! UGH! But tonight is all about our Blues! The NHL Playoffs start tonight for the Blues. I went way out on a limb with my statement about the team at the beginning of the year, so don’t let me down now! The Grassroots are playing their song: Let’s Live For Today. Shalalalala live for today, and not worry about tomorrow. sounds like good advice! For today is here and tomorrow is not promised to us. Mike Meyer always does what the hockey player do during the playoffs.. not shave. And I would bet that Chris Gaffney will be at the game tonight. An 8:30 CT start to the game tonight. What gives with that? It’s a school night! I’ll just record it and then if I hear they won I’ll watch it tomorrow, and if they didn’t win, heaven forbid, I’ll just delete the recording! But 8:30? This is the Midwest, we don’t stay up late on school nights. Oh well, can’t change it, so why fret over it? It’s just wrong, period! And with that uplifting thought, I’ll wish you on your way to having a Tub Thumpin’ Thursday.

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