Chuck Butler’s: A Pfennig For Your Thoughts
January 17, 2018
* BOC meets today what will they do?
* Chinese rating agency lowers U.S. rating…
Good Day… And a Wonderful Wednesday to you! Well, my wishes that my stomach problems would leave me once our guests arrived yesterday, came true! Well, they went away for the day and evening, which was fine with me. Our Blues won in overtime in Toronto last night, so, it was a good day all-around! England Dan and John Ford Coley greet me this morning with their song: Nights Are Forever… Those two guys sure had some great mustaches…
Well, as i left you yesterday, the European session was taking some profits on the currencies that had been well bid throughout the night to that point. When the U.S. market opened, the profit taking stopped and the currencies rallied once again, only to see the profit takers come back at the end of the day. the overnight markets haven’t seen much movement, and so we start the day with the currencies and metals off their lofty levels of yesterday, but not by much, so don’t panic!
The Bank of Canada (BOC) will meet today, and it was once through in the markets that the BOC would follow the Fed’s rate hike, with one of their own at this meeting. But recent data has caused some hedging of those rate hike thoughts, and now the so-called experts are saying that the BOC will not hike rates, but talk hawkishly today… Hmmm… I’m going to go out on a limb here, no worries, a big fat limb to hold me, and say that the BOC will go ahead and hike rates today.
The only thing in my mind that could stop BOC Gov. Poloz from hiking rates is the fact that the loonie has moved past 80-cents in recent trading… And Poloz does not like a strong loonie! Of course it’s all relative, as I wouldn’t consider a 80-cent loonie to be strong… Back in the day when the loonie was at parity to the dollar, was a period when I would have considered the loonie to be strong!
But given the fact, that just a year ago, the loonie was fighting to get back to 72-cents, today’s 80-cent figure looks pretty good, and to Poloz, it looks too strong. And a rate hike could very well push the loonie even higher, and so… That’s the bugaboo for Poloz today as the BOC meets.
The euro saw choppy trading yesterday, when at time it appeared ready to move forward to 1.23, and other times when it appeared it would lose the 1.22 handle, and finally settling in around 1.2230.. I read a piece this morning that had economists increasing their calls for a stronger euro and price of Oil this year. A Trader at JP Morgan made the call that the euro would be 1.24 by year-end…
Hmmm… that sure appears to me to be a safe call considering the euro traded near 1.23 on Monday, and there’s still 11+ months to this year! I would have been more impressed if he had said the euro would be 1.30 by year-end… But he didn’t, and so we go along with the thoughts that the strong dollar trend is over, and a new weak dollar trend is forming and where the euro ends up only the Shadow Knows!
Back in June I was ahead of the crowd with the euro, as it was trading at 1.09, and said that the sentiment had changed toward the dollar/ euro, and the euro was ready to break out on the upside… I always love it when the markets catch-up with what I’ve been saying for months…
Well, the U.S. Gov’t. is getting close to a shut-down again… I don’t see it happening, instead I see either a deal is closed or they kick the can down the road further, and extend the talks… Remember the last time they extended the deadline and I said, it make me laugh because what makes them think they can get a deal done in two weeks, when they’ve had all year to get it done?
Gold closed down $1.60 yesterday to end the day at $1,338… In the early trading this morning, Gold is down a couple of bucks. I’m a very impatient man when it comes to the price of Gold.. I truly expect to see it moving higher on a daily basis, given every thing that’s going on in the world these days, including negative interest rates in Sweden, Switzerland, Japan and the Eurozone, and the U.S. with negative “real interest rates”, which I’ve explained before, but here goes again… “real interest rates” are the net of the current Fed Funds rate minus inflation… And when doing that, the U.S. rates are negative.
But that’s not what is happening with Gold’s price right now… It’s not to say that it couldn’t happen in the future. And if you’re like me, you’re just too impatient to wait for that to happen! HA!
Well, I told you yesterday that the U.S. Data Cupboard would have two of my fave real economic data prints today… Industrial Production (IP) and Capacity Utilization (CAPU) both will print with their December results today. Throughout 2017, these two data pieces were just atrocious, and so I think that with everything else that was moving along nicely in December with all the deficit spending, that these two will show better results for December…
Oh, and did you hear that a ratings agency in China lowered the credit rating of the U.S. from A- to BBB+? Ok, they aren’t Moodys or S&P or Fitch, but at least someone out there sees what I see regarding the debt and now tax cuts coming…
To recap… A choppy day of trading for both the currencies and metals left them all lower in value than they were yesterday morning, as we start today. Chuck thinks that for the most part the selling has been profit taking, which should end today, if that’s correct. The Bank of Canada meets today to discuss rates, and while the markets have abandoned their call for a rate hike today, Chuck keeps the pedal to the metal on the rates hikes in Canada.
For What it’s Worth… well this article came to me curtesy of longtime reader Bob and it’s an article on Zerohedge.com about the coming collapse of the dollar, and can be found here: https://www.zerohedge.com/news/2018-01-15/dollar-collapsing
Or, here’s your snippet: actually there is no snippet, because the article is all chopped up with some great graphs in between, so you’ll have to click the link to see what’s going on with the dollar…
Currencies today 1/17/18… American Style: A$ .7981, kiwi .7271, C$ .8033, euro 1.2242, sterling 1.3785, Swiss $ 1.0387, … European Style: rand 12.3060, krone 7.8691, SEK 8.0437, forint 252.48, zloty 3.4087, koruna 20.7883, RUB 56.40, yen 110.74, sing 1.3229, HKD 7.8192, INR 63.85, China 6.4370, peso 18.77, BRL 3.2196, Dollar Index 90.61, Oil $63.57, 10yr 2.55%, Silver $17.21, Platinum $1,003.60, Palladium $1,110.65, and Gold… $1,336.40
That’s it for today… A little shorter than normal, but chock-full-o-information, eh? A friend of mine back in frigid and snowy St. Louis sent me a cartoon yesterday that had me laughing out loud… It was a man all bundled up with snow shovel in hand, telling his wife… “I’m going back out to shovel 24 inches of global warming”… HAHAHAHAHA! Had a blast with our guests, Gary and Diane yesterday and last night… Their visit is a short one, as they leave this afternoon… UGH! We love visitors to our winter home! Maple Leaf Gardens, is where our Blues won their game last night, good for them! I’m going to go to Roger Dean Stadium today and pick up my spring training tickets. I always get excited to receive them! Alrighty then, the Guess Who takes us to the finish line today with their song: Undun.. Now, got out and make this a Wonderful Wednesday! And don’t forget to be Good To Yourself!
Chuck Butler