Data Dependency
"Everything turned around on a dime yesterday when the governor printed a CPI (inflation) report that showed a 0.6% gain for April, which was greater than expected. I warned everyone that the April report would most likely yield an upside due to the price of oil during the month."
by Chuck Butler In this issue… - CPI prints stronger than expected
- Canada's CPI prints weaker than expected
- Gold gets sold again.
- Shumer & Graham back at the whining table.
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--------------------- And Now… Today's Pfennig! Data Dependency Good day. Well, everything turned around on a dime yesterday when the governor printed a CPI (inflation) report that showed a 0.6% gain for April, which was greater than expected. I warned everyone that the April report would most likely yield an upside due to the price of oil during the month, and that the report would lead to dollar strength. This brought to mind the comment that Big Ben Bernanke left us with at the last FOMC: Further rate hikes will be determined by the data. So, keeping that in mind, the rate-hike campers came out of the wall, screaming and kicking sand in the faces of currencies, stocks, and commodities. If inflation is going to show that kind of a gain in one month, the Fed most certainly will react with another, if not two rate hikes. That thought erased any gains the currencies had made at that point, and the trap door in floor was sprung on them. Euros fell 1.5-cents, and the yen went down almost two whole figures! Ouch! But I don't believe this one-day move will remove the underlying negative momentum against the dollar, and that can be seen in the overnight recovery, of sorts, for the currencies. Euros have gained back 1/3rd of a cent, and the yen is heading back to 110. Yesterday saw a lot of show attendees walking around with sad looks on their faces, given the 215-point loss of the Dow. So, they would head over to our booth, and we wouldn't be able to console them either! However, now these are definitely better currency levels to buy what we saw at the beginning of the week! Canadian loonies are seeing some selling pressure after their April CPI report fell to 1.6%. Now, technically speaking, this should be "good news" for the loonie. However, with the markets so focused on rate hikes, this report could very well remove the thought of a Bank of Canada's rate hike. Again, though, I'm going to take the opposite side of that thought, and say the Bank of Canada will continue with their rate-hike cycle and hike rates next week when they meet. We have a ton of "speakers" today. Who knows what this will bring us, but here's the lineup. We begin with St. Louis Fed Head Poole, who speaks on yield-curve inversion, Fed Chairman Bernanke speaking regarding real estate, ex-chairman Greenspan making remarks at a Bond Market Association Event, and the U.S. Treasury's Snow testifying before the Senate Banking Committee on the latest Currency Report. Well, being on Pacific Time, I'm able to see some of the data that comes through before I hit the "send" button. For instance, the weekly jobless claims just printed and jobless claims jumped higher to 367,000, last week, from an upwardly revised rise of 325,000 in the previous week. The experts had forecasted the jobless claims to come in at 320,000, so they were completely off base. The thing to think about here is that this data has been trending the wrong way. After falling to a weekly number of around 300,000, it has been trending up and that's not good. So, is Big Ben going to look at this data too? He had better! Gold sure took the inflation news on the chin. I'm surprised by that information. One would think that if inflation were moving higher, that the hedge against inflation would rally, that inflation being gold. However, the nice overnight rally that took place in gold on Tuesday night, was all lost once the U.S. inflation report printed yesterday. This could be something that keeps gold range bound for a little while, as this report and sell off shakes off some "old longs." But, it shouldn't last too long! I see where U.S. Senators, Schumer and Graham are back at the whining table. Yes, these two that have been at the forefront of the complaints against China and their currency policy. They have actually introduced legislation to place tariffs on Chinese exports to the United States (but then pulled it back), are complaining to U.S. Treasury Snow again. Apparently, the smoky back-room deal that the United States made with China that kept the United States from naming China a "Currency Manipulator," isn't working out. Apparently, China isn't keeping up with their end of the deal! In fact, last night, the Chinese renminbi actually weakened versus the dollar! These two lawmakers have really paraded around. They even visited China - only to have the Chinese make them look foolish. This whole scenario has bad vibes all around it. I was hoping that these two would go away for a while. Apparently not! Ugh! On that note, I'm going to head to the big finish. Currencies today: A$ .7650, kiwi .6250, C$ .8980, euro 1.2785, sterling 1.8870, Swiss .8245, ISK 71.50, rand 6.4275, krone 6.1370, forint 207.70, zloty 3.10, koruna 22.19, yen 111, baht 38.15, sing 1.5790, INR 45.45, China 8.01, pesos 11.19, silver 13.09, and gold $687.80 That's it for today. I have my second presentation in about an hour, so I've got to look that speech over. I sure hope my beautiful bride is feeling better today. She sure had a rough go of it yesterday, and I'm feeling a bit useless away in Las Vegas! Ugh! I was quite busy yesterday with writing things. Chris is feeling better. Have a great Thursday! |
