Rocktober 12, 2017
* Catalans opt for negotiations…
* FOMC Minutes lead to rate hike thought slippage
* 2010 revisited…
Good Day… And a Tub Thumpin’ Thursday to you! Well, I’ve had to restart my laptop twice already this morning, and lost all that I had written, so here I go again… The baseballs gods weren’t nice to the Cleveland Indians yesterday, and the team that I thought would go all the way, is out. Now, I’ll switch my rooting for a team to the Houston Astros, who used to be in the National League, and were big rivals to the Cardinals… Midnight Oil greets me this morning with their song: Beds Are Burning…
Everyone, well everyone that cared about the euro, were holding their collective breath yesterday, when the Catalan President, was to give a speech about the independence for Catalonia… But, instead the President, Charles Puidgdemont, decided to suspend the independence and instead rely on negotiations with the Spanish leaders in Madrid. And with that news out of the way, the euro added to its gains yesterday as the day went on, trading all the way up to 1.1875, last night during the Asian session.
I wrote an article for the FX Street on the whole Catalonia affair, and it can be found here: https://www.fxstreet.com/analysis/time-for-divorce-between-catalonia-and-spain-201710100749
I really think that you should check it out, that is if you own euros, or have any interest in this whole “divorce” thing going on with Spain and Catalonia… But for now, they’re talking and not fighting… Spanish police have surrounded the Catalonian Parliament building in Barcelona.. These two are going to need some very good divorce lawyers, or it’s going to get really ugly there…
But the news from Spain / Catalonia wasn’t the only thing boosting the euro yesterday. The Fed’s FOMC Meeting Minutes (FMM) printed and left the markets thinking that there may be some slippage in the thought that a December rate hike is in the cards. There was some lively discussion regarding a disagreement among a few Fed members about whether the low inflation is a “temporary things” or “here to stay”…
And that discussion got the markets thinking that maybe, just maybe, the Fed will opt to skip the rate hike in December, because of the lower inflation… Of course, you dear reader, know that I’m of the opinion that there will be no December rate hike, that by then, the Fed will be discussion how to reverse their stance on “this is a strong and robust economy”…
The Antipodean currencies of Australia and New Zealand were able to ratchet up a higher on the FMM disagreement, and that was good to see, given that these two have been mired in the muck for a few weeks now, with New Zealand going through negotiations for a coalition government, and Australia seeing a slower patch of data recently.
The Petrol Currencies gained as a collective bunch overnight when the price of Oil didn’t seem to slip much after the most recent Oil supplies report showed that supplies were gaining once again. The Mexican peso was one Petrol Currency that was unable to participate in the rally though…
When 2017 is all totaled up, the Mexican peso will probably be at or near the top of the best performers for the year. But let me point out that all of that performance came early in the year as it moved from a pre-election in the U.S. level of 25, to a post-election level of 18… And has basically stayed around 18 the rest of the year. It was a case of sell the rumor, buy the fact… And in this case it was sell the rumor that there was going to be a wall built and Mexico would pay for it, and after the election, those words had cold water thrown on them…
Enough on the peso, I’m not a fan and doubt that I will ever be one! Gold saw another day of “running up toward $1,300, and then “the boys in the band” showing up and bringing the shiny metal back down”… But Gold was able to hold on to some of its early day gains, and ended up $3.60 on the day, with 265,000 contracts traded in the metal. Gold is up in the early morning trading today, and is currently trading at $1,296.70.. We’ll see how much of that early morning gain is still around once “the boys in the band” show up.
One of my “fave countries”, Singapore will soon see their Central Bank meet. For readers new to class, Singapore has a unit of the Central Bank called the Monetary Authority of Singapore (MAS), and its their job to monitor inflation and economic growth, and make adjustments to the trading band that the Singapore dollar (S$) traded in… I don’t think the MAS will be making any major changes to the trading band at this meeting, as the economic data has been choppy in Singapore, and inflation is non-existent, which is where the Central Bank wants to see inflation stay!
Singapore is one of the countries in the world that uses the S$ as their tool to keep inflation in check. If inflation begins to rise, the MAS will adjust their trading band, and the S$ will strengthen to combat the rising inflation. I like this method much better than most Central Banks, including the Fed Reserve, that use interest rate hikes to combat rising inflation.
In 2008, I was writing for the Sovereign Society on the side, and the letter was called: The Currency Capitalist… And I was the first to break the news that China was signing currency swap agreements with countries they traded with, to remove the dollar from the terms of the transaction. Well, these agreements kept getting signed, and I kept telling people that when China breaks the Petrol dollar hold, that it would signal the end of the dollar as the reserve currency of the world…
Well, guess who China is talking to now? That’s right Saudi Arabia… the country that Henry Kissinger talked into agreeing to sell their Oil only in dollars back in 1973. Well, the Saudis aren’t too happy with the U.S. these days, especially after the courts ruled that the lawsuits against their country could continue (we talked about that last year).. And I’m afraid that they will soon announce that they are going to start selling their oil and use Chinese renminbi in the terms of the trade… Uh-Oh!
If that were to happen, it would be a “Houston we have a problem” scenario for the U.S. dollar.. And IF that were to happen it would begin to take the reserve currency status away from the dollar. And this is where I’ll remind everyone that in 2010… That’s right 7 years ago, I told anyone that would listen to me (yeah there are a few of you out there, right? ) that by the end of this decade the dollar would no longer be the reserve currency of the world. In fact, for a year in 2010, I titled my presentations “A Change In The Currency Regime”…
OK, Chuck, we got the message, you said 7 years ago that IF China got the OPEC nations to agree to the currency swap agreements that it would be one of the last nail’s in the dollar’s reserve status coffin, you don’t have to drag it out and keep reminding us! HA!
Of course, the negotiations between China and Saudi Arabia, could end up with no changes, there’s always the chance of that… But as I tell people all the time when they ask me about chances… I say they are “slim and none and Slim left town”…
The U.S. Data Cupboard is still restocking today… We did have the FOMC Meeting Minutes yesterday, but today we’ll see the Weekly jobless claims and Sept. PPI, (wholesale inflation)… The experts are calling for an increase in PPI of 0.4%, which would be strong move in the month.
Tomorrow’s Data Cupboard has Sept. Retail Sales, which I’m afraid I’m going to get a bad reading from the BHI (Butler household index) because I do believe that Retail Sales will be fueled by auto sales.. Remember when I told you about all the flooded cars from the hurricanes, and new car purchase would be getting made? Well, here we go! I saw on TV the other night, a large field filled with over 30,000 previously flooded cars that were abandoned… Can you imagine showing up there and attempting to find your car? So, just leave it, and buy a new one, and that’s going to fuel Retail Sales tomorrow…
To recap… The euro received a boost from two areas yesterday, first it was Catalonia opting for negotiations instead of a call for independence, and 2nd was the Fed’s FOCM Meeting Minutes, which had the markets thinking that there could be some slippage now in the Fed’s December rate hike… The Antipodean currencies saw this and rallied, and the Petrol Currencies rallied when the price of Oil didn’t slide much on new supplies data…
For What it’s Worth… Since I spent some time on this subject this morning I thought the FWIW piece would be a good place to continue the discussion regarding Saudi Arabia and China. This link was sent to me from long time reader, Bob, and can be found here: https://www.cnbc.com/2017/10/11/china-will-compel-saudi-arabia-to-trade-oil-in-yuan–and-thats-going-to-affect-the-us-dollar.html
Or, here’s your snippet: “China will “compel” Saudi Arabia to trade oil in yuan and, when this happens, the rest of the oil market will follow suit and abandon the U.S. dollar as the world’s reserve currency, a leading economist told CNBC on Monday.
Carl Weinberg, chief economist and managing director at High Frequency Economics, said Beijing stands to become the most dominant global player in oil demand since China usurped the U.S. as the “biggest oil importer on the planet.”
Saudi Arabia has “to pay attention to this because even as much as one or two years from now, Chinese demand will dwarf U.S. demand,” Weinberg said.
“I believe that yuan pricing of oil is coming and as soon as the Saudis move to accept it — as the Chinese will compel them to do — then the rest of the oil market will move along with them.””
Chuck again… Currency diversifiers will be slapping themselves on the back for going this route when this deal between Saudi Arabia and China gets finalized… And that’s all I’m saying about that!
Currencies today 10/12/17… American Style: A$ .7820, kiwi .7112, C$ .8020, euro 1.1855, sterling 1.3224, Swiss $ .9747, … European Style: rand 13.4849, krone 7.9070, SEK 8.0930, forint 260.79, zloty 3.6020, koruna 21.8161, RUB 57.84, yen 112.39, sing 1.3543, HKD 7.8077, INR 65.15, China 6.5859, peso 18.71, BRL 3.1722, Dollar Index 93.02, Oil $50.85, 10-year 2.34%, Silver $17.23, Platinum $934.19, $Palladium $967.89, and Gold… $1,296.70
That’s it for today… With all the shenanigans with the restarts this morning, I know this is late again… UGH! Oh, well, better late than never, eh? I received an email from the Money Show people yesterday, asking me for an updated photo of me for their website. I responded and said, what for? I haven’t spoken at a Money Show event in 4 years! The explained that now that I wrote under the Aden Research Flag, and the Adens did speak at Money Shows, that they needed an updated photo… I’ll get around to sending them one sometime down the line… I’m sure the one they have is good, and probably better than any newer one! HA! Redbone takes us to the finish line today with their song: Come And Get Your Love… The soundtrack from the first Guardians of the Galaxy has so many great 70’s songs on it, and this one is one of those! OK, time to get out of your hair today, I hope you have a Tub Thumpin’ Thursday, and remember to BE Good To Yourself!