May 30, 2018
* Currencies rebound in the overnight markets!
* Fundamentals point to ruble appreciation?
Good Day… And a Wonderful Wednesday to you! Today is the day all Cardinals baseball fans have been waiting for. The Day Alex Reyes takes the ball and starts a game for the Cardinals. And Major League Baseball is in the doghouse with me, for this will be one of those games that’s only shown on Facebook… Wait, What? I guess it’s back to listening to the game on the radio! Kansas greets me this morning with their song: Hold On… And we start a new day…
Well, the dollar still had a tight grip on the euro and the other currencies, as even the Aussie dollar (A$) dipped below 75-cents yesterday, which I thought to myself yesterday that I should have never talked about how the A$ was hanging onto the 75-cent handle… I jinxed the A$… sorry… But in reality it wasn’t fair to the other currencies to not get mixed up with U.S. dollar strength! HA! I know, I sounded like a millennial there, with their “it’s not fair” whining…
When Alex was a young boy, he really had a problem with the “it’s not fair” stuff, until one day I sat him down, and told him that while he might not actually get this until he was older, but that “life isn’t fair”.. .and then asked him, “do you think it was fair for me to get cancer?” It hit him like a palette of bricks, and I don’t think I ever heard me say that again!
Sorry about that, I started typing and before I knew it I was going into stuff you probably don’t give two hoots about!
I had good intentions to go from what happened yesterday to what’s going on in the overnight markets, so this looks to be as good a place as any! There’s been some healing in the currencies in the overnight markets, and the euro has climbed back to the 1.16 handle, and the A$ is back above 75-cents!
I think this trading is a result of traders feeling that they had gone too far, too fast…
I do want to point out something that caught my eye yesterday, and that is the yield on the 10-year Treasury, which last week was above 3%… But this week, the yield has fallen back below 3%, to 2.87%… Folks, being from a bond trading desk in my early formative years, I would say that this is the bond guys saying that they don’t believe the Fed’s stated path for interest rates this year… (2 more rate hikes that is) I was taught many years ago to watch what the bond market is doing, because that’s the key indicator of what’s ahead for the economy and interest rates…
I get asked a lot by readers and people I talk to that want to know what currencies I like right now…
I usually start with the Chinese renminbi… and right behind the renminbi is the Russian ruble… You must remember though, I’m a fundamentals guy, and when I like a country’s fundamentals, I like their currency…
And yesterday, dear longtime reader, Bob, sent me a note that quoted the IMF Chief, Christine Lagarde talking about Russia… let’s listen in… “Russia has put in place an admirable macroeconomic framework-saving for a rainy day, letting the exchange rate float, introducing inflation targeting, and shoring up the banking system. As a result, it was able to weather tough times well, and today it has virtually no fiscal deficit, a solid current account balance, and very little debt.”
Sounds like a recipe for good currency appreciation doesn’t it? And even though they have brought down their extremely high interest rates, those rates still remain at a positive differential to most currencies of the world. And I can’t discuss how well Russia is doing without giving kudos to the Central Bank of Russia (CBR) Gov. Elvira Nabiullina, for my money, she’s the best Central Banker out there right now… Longtime readers know that I have no extra love for Central Bankers these days, as for the most part, they have gone to the dark side… But Ms. Nabiullina is the exception to the rule, and for her work, the ruble should be appreciating… Patience is a virtue right? All good things come to those who wait, right? Well, my patience is growing thin waiting for the ruble to appreciate, and return to the levels it traded around before the conflict with Ukraine began. So, come ruble traders, investors, and potential investors, get up off your duffs and get to buying some rubles while they’re cheap!
Well, this morning in the Eurozone, their latest reading on consumer inflation (CPI) will print, and most economists think it will bump higher to 1.9%, which would be very close to the European Central Bank’s (ECB) target rate of 2.0%, and if the ECB sees the momentum for CPI to be going higher, then it would certainly signal to the ECB that they need to begin their much awaited dismantling of Stimulus…
And in Italy, they will hold a bond auction for Italian Gov’t bonds… the slaughtering that Italian bonds had taken in recent days, was held at bay yesterday, and there was some healing, so this auction this morning is a litmus test for this debt… and the euro as an extension.
Elsewhere around the world the Bank of Canada (BOC) meets this morning to discuss rates. There isn’t one soul out there that thinks the BOC will hike rates at this meeting, but what will be looked for are any indications that rate could be going higher in future meetings… The Canadian dollar/ loonie saw some selling on Monday, but was back to being bought in the overnight markets… I’ve always liked the loonie, because they have “something” that other countries want, which should keep the loonie well bid…
The loonie has been quite resilient in the face of two dark clouds overhead, with one being the NAFTA negotiations, which by all reports aren’t going well, and the other being the Gov. of the BOC, Poloz… I’ve gone through, my fears of what he’s up to many times in the past, so I won’t go through it again, just smile and move along with me here to the next thing going on today… HA!
Gold was able to add a whopping $1.20 to its price yesterday, after nearly 300,000 contracts were traded in the metal… I was reading some reports yesterday about Gold, and how the supply is down, and the demand is up for physical Gold from Russia, China, Turkey, Iran, and so on… And it’s this scenario that I point to for all the naysayers to Gold price manipulation, as my question for them to explain how that might happen, given the supply and demand situation..
The U.S. Data Cupboard yesterday saw Consumer Confidence jump even higher this month from 125 to 128… Crazy, I know, but what are you going to do about it? Nothing, absolutely nothing, say it again! Today’s Cupboard has the second reading of first QTR GDP… The first print gave us a 2.3% growth rate… the only way I see this number changing is it goining downward…
It’s also ADP Employment Report day, which means that this Friday will be a Jobs Jamboree Friday! Recall that we’ve seen two consecutive months of disappointing jobs reports… And if you were to take out the BLS’s hedonic adjustment from last month’s total, it would have been negative! Right now the so-called experts think the total jobs created in May will be 198,000… Again, less than the previous month’s total…
To recap… The death grip the dollar has had on the currencies and metals has been loosened in the overnight markets, with the euro and A$ recovering some lost ground. Gold gained a whopping $1.20 yesterday… Chuck talks about the Russian ruble, and their great Central Bank Gov. And gives us his thoughts on why the yield on the 10-year Treasury bond has fallen in recent trading days…
For What It’s Worth… I sure hope everyone reads this today, and they say, after reading it, that Chuck sure has been telling us all this, but we were looking through the Fed’s rose colored glasses and believing the hype they were spreading about the strong economy.. We feel badly that we didn’t believe Chuck! This article is about how the economy is sinking folks… and can be found here: http://www.stltoday.com/business/local/the-alarming-statistics-that-show-the-u-s-economy-isn/article_140475b7-864e-52a5-a68b-7a78eb17e9e3.html#utm_source=stltoday.com&utm_campaign=BusinessNewsletter&utm_medium=email&utm_content=A12874506A3B5805DDED6C95AF30D7173DF7C77A
Or, here’s your snippet:”
In the past week, two reports – a new Federal Reserve survey of more than 12,200 Americans about their finances and a new United Way report on financial hardship – reveal just how unstable life remains for a large number of people. Here’s a rundown of the key findings:
– Forty percent of American adults don’t have enough savings to cover a $400 emergency expense such as an unexpected medical bill, car problem or home repair.
– Forty-three percent of households can’t afford the basics to live, meaning they aren’t earning enough to cover the combined costs of housing, food, child care, health care, transportation and a cellphone, according to the United Way study. Researchers looked at the data by county to adjust for lower costs in some parts of the country.
– More than a quarter of adults skipped necessary medical care last year because they couldn’t afford it.
– Twenty-two percent of adults aren’t able to pay all of their bills every month.”
Chuck again… nothing new here to me, how about you?
Currencies today 5/30/18… American Style: A$ .7550, kiwi .6975, C$ .7702, euro 1.1635, sterling 1.3280, Swiss $1.0099, … European Style: rand 12.5535, krone 8.21, SEK 8.84, forint 274.32, zloty 3.7028, koruna 22.1935, RUB 62.58, yen 108.90, sing 1.34, HKD 7.8460, INR 67.38, China 6.4129, peso 19.70, BRL 3.7324, Dollar Index 94.33, Oil $66.80, 10-year 2.87%, Silver $16.39, Platinum $904.89, Palladium $980.73, and Gold… $1,301.50
That’s it for today… The rain from the tropical storm Alberto, that hit the gulf region this past weekend, has made its way to St. Louis… That’s OK, nothing planned outside for me anyway! In every life a little rain must fall… right? Cardinals find their bats again last night in time for a win… And now it’s the Alex Reyes debut… I sure hope he can deal with the hype surrounding him, and pitch a good game. Matthew Sweet takes us to the finish line today with his song: Evangeline… Years ago, Chris Gaffney and Chuck took a foreign bond trader from AG Edwards to a concert by Matthew Sweet… How long ago was that, Chuck? Probably 20 years ago! OK, let’s head out the door, and I hope you have a Wonderful Wednesday, and remember to Be Good To Yourself!
Chuck Butler