August 28, 2019
* Back to the dollar bugs ruling the roost…
* But the dollar can’t hold Gold in check!
Good Day… And a Wonderful Wednesday to you… A Chamber of Commerce Day here in the St. Louis region yesterday… And I failed to spend much of the day outside… I’ve told you before that sometimes I get whacked out, and all I want to do is sleep all day… Well, I didn’t sleep ALL day, just a good piece of it! I would be fired in a minute the first time I fell asleep at a job! So, I guess it’s a good thing I was shown the door a few years ago! Pink Floyd greets me this morning with my fave Pink Floyd song: Comfortably Numb…. Remember when I used to say that the U.S. had become comfortably numb with debt accumulation? I gave up on that, because it just keeps getting worse and worse!
This should be short and sweet today, as I just don’t have that much to say in addition to what I’ve already said about the markets, manipulation, dots and twits… But I’ll give it that old college try!
The dollar is back in the driver’s seat this morning, pushing the currencies down to levels that look very ugly… The Norwegian krone, which a couple of weeks ago, I said I was worried about, finally gave up the ship and fell into the 9 handle… UGH! The Euro Wannabes, forints, zlotys and korunas, have hit the skids, and just keep sliding downward… Remember what I’ve said in the past, that when these three currencies get on the rally tracks then you know it’s a good currency rally…
Even the Russian ruble which has been Steady Eddie through all of this dollar strength, gave up some ground in the trading yesterday and overnight. And this is doubly interesting because the price of Oil rose to above $55 in the past 24 hours… So no love for the Petrol Currencies, all the love is being given to the dollar right now… So, we might as well embrace that… I mean it… Shoot Rudy, you can’t fight city hall, you don’t pull on Superman’s cape, and you can’t fight the dollar bugs once they’re entrenched in their bunkers…
But what if all this dollar strength isn’t good for the world, including the U.S.? Well, I have some thoughts on that subject, that I’ll let the folks at Bloomberg explain to you this morning… “Not only does the U.S. currency’s climb tend to erode the profits of American multinationals, but it also raises the costs of foreign corporations with trillions of dollar-denominated debt. The pressure from greenback strength on other economies could even encourage those countries to join a U.S. attempt to weaken it.
“If you start to see the U.S. economy really begin to decelerate and the dollar continue to strengthen, that would suggest a dislocation with fundamentals that is unsustainable and will get the attention of policy makers,” Bank of America senior foreign-exchange strategist Ben Randol said in a phone interview. “If the U.S. can make its concerns heard with its international counterparts, it can potentially get some support for a coordinated intervention that suppresses the strength of the dollar.”
There’s that “intervention” word again… There sure seems to a lot of talk about that possibility suddenly… So, I found a good article on it for the FWIW section today, you won’t want to miss that!
OK, U.K. PM Boris Johnson, threw a cat among the pigeons in the past 24 hours, as he announced that he was going to suspend Parliament at the end of September… Why? Because that way they would not be in session to vote down a BREXIT Deal… That’s Tricky, isn’t it? Imagine if you would, that the U.S. was a parliamentary gov’t. and Trump could just suspend parliament (the house and senate) and do what he wanted? See? Young people are always wanting to change the Gov’t… To what? Checks and balances folks… that’s what it’s all about in governing a country…
Sterling traders didn’t like the message that Johnson sent, and they began to mark down the currency immediately…
But all this talk of bad things happening to currencies and all the love given to the dollar doesn’t apply when we switch gears and head over to the Gold window… The dollar may be the cat’s meow VS the currencies, but it’s not cutting the mustard when it comes to keeping Gold in check…
Gold gained $18 yesterday… And Silver? OMG! it rose above $18 for the first time in what seems like a lifetime! I had just read a traders comments on Silver this past weekend, and he talked about the $18.50 level as key, for he thought that once Silver went through $18.50 it’s next stop would be $20… And if history is to come into play here with Silver, the last time Silver went on a run and got to $20, it was clear sailing all the way to $50…
OK, I’m not shouting from a rooftop that Silver is going to $50… I’m just pointing out that the last time that’s what it did… And you know me, I love it when history gets repeated!
The U.S. Data Cupboard had the Case/Shiller Home Price Index (HPI) yesterday, and like I said yesterday, “Home prices in preceding months had fallen, and I didn’t see any reason why the June report wouldn’t show the same, and it did… It showed Home Prices only grew 3.1%, VS 3.3% in May…. Oh, and get this… I’m going to pause a minute here so you can get the real sarcasm of this…. The Consumer Confidence Index rose from 128 to 135 this month… Really? With all the talk of the Trade War getting really ugly, and a recession coming, the Fed backed into a corner, Consumers are Confident? Well, bust my buttons! Oh, that’s right, Consumers believe the stock market is the economy, shoot Rudy, even the Fed believes that now, judging from their statement last week, So, I guess Consumers aren’t wrong for being confident… NOT!
For What It’s Worth… OK, yesterday, I painted a picture for you of how two countries and maybe three could be joining forces to get what they want out of their respective currencies via intervention… The U.S. / Japan and maybe even the Eurozone… And then I find this article on MarketWatch that just blew me away… They must be Pfennig readers because that’s what they were talking about! All the while you read this, remember what I was talking about yesterday, and say… “How’d he know”? HA! OK, you can find the article here: https://www.marketwatch.com/story/heres-how-currency-intervention-works-2019-07-12
Or, here’s your snippet: “Intervention occurs when a central bank buys or sells its own currency in an effort to influence the exchange rate.
A government might take action to halt a precipitous slide or a sharp runup in its currency following a shock. It could also act in concert with or on behalf of other countries in an effort to stabilize a particular currency. In fact, the last time the U.S. intervened in the currency market was in March 2011, as part of a coordinated effort by the Group of Seven nations to arrest a surge in the Japanese yen following a devastating earthquake and tsunami.
According to the New York Fed, the foreign currencies used to intervene by the U.S. usually come equally from Federal Reserve holdings and the Treasury’s Exchange Stabilization Fund. Those holding consist of euros and Japanese yen.
The New York Fed’s trading desk does the buying and selling, often dealing simultaneously with several large interbank dealers in the spot market. The New York Fed, in a 2007 note, observed that it historically hasn’t engaged in the forward market or other derivative transactions.
The process is also meant to be transparent, the New York Fed says, with the U.S. Treasury secretary typically confirming the move while the Fed is conducting the operation or shortly thereafter. After all, authorities are attempting to send market participants a message, so there’s little incentive for them to cover their tracks.”
Chuck Again… OK, also to the point… I’m not in favor of intervention… I’ve always said that the markets have deeper pockets than any Central Bank… But that comment came to me years ago, before there was carte blanche printing of currencies… Think about that one for a moment… So combined intervention may work, short term, but it’s not always a given that it will continue to work… And then all those countries lose money and currency traders are the only ones that come out on top!
Currencies today 8/28/19 American Style: A$ .6745, kiwi .6347, C$ .7511, euro 1.1086, sterling 1.2207, Swiss $.9812, European Style: rand 15.3690, krone 9.0334, SEK 9.7058, forint 297.70, zloty 3.9584, koruna 23.3170, RUB 66.32, yen 105.72, sing 1.38, HKD 7.8462, INR 71.81, China 7.1595, peso 20.00, BRL 4.1467, Dollar Index 98.15, Oil $55.64, 10-year 1.46%, Silver $18.43, Platinum $877.35, Palladium $1,472.54, and Gold $1,543.19
That’s it for today… Another Chamber of Commerce day here for today, and today, even if I do feel like sleeping I’ll do it outside! No, I’ve got things to do today, to prepare for the big BBQ this weekend! Well, college Football really kicks off this weekend as everyone plays! And that includes my Mizzou Tigers… Good luck Tigers, I’m expecting a very good year! This morning we’re being taken to the finish line by the Outfield and their song: Your Love… I always think of my good friend Rick when an 80’s song plays… I hope you have a Wonderful Weekend, and please Be Good To Yourself!