The Dollar Fights Back

Good day, and a wonderful Wednesday to you!

What the heck happened overnight? The dollar has reversed its downward path, and is back on top this morning, even with the price of oil rising above $41, and China printing some better than expected Trade numbers. What’s going on here? The euro, which had pushed well into the 1.14 handle, is getting whacked, and the European Central Bank (ECB) hasn’t even met yet (they meet tomorrow)! There was a whispering campaign going on in Europe yesterday regarding the ECB’s uneasiness with the rise in the euro, and that the ECB might do something about it.

And then there’s the Japanese yen, which just a couple of days ago, had reached a 17-month high vs. the dollar, is getting whacked. And the petrol currencies aren’t seeing any love even with oil above $41 this morning. My spider sense is tingling folks. What was the result of the “emergency meeting” between Fed Chair, Janet Yellen and the POTUS the other day? Is this it? Was the message more than just a plea to ease monetary policy ahead of the election? Was it to stop the bleeding in the dollar?

Hello? Is this Mario Draghi? Good, this is Janet Yellen, I’ve also got Mr. Kuroda on the conference line, can everyone hear me now? OK, we all decided in Shanghai last month that the dollar had gotten too strong, and that we needed to do something about that, well, now the dollar has gone too far too fast, and this has got to stop. Does anyone have any suggestions as to how we pull this off without the media catching on?

Ok, that was all made up, by the mind of Chuck Butler (remember those commercials? Only from the mind of Minolta) I’m sure none of that happened, for this is the 21st century, and someone would leak that information, right? Look around on the internet, you won’t find anything about the Yellen/POTUS meeting, but Polly Anna stuff. So, I made up some stuff that I think probably could have happened, that would explain this turnaround in the currencies. Gold is down $12 this morning, too. So, it’s not just the currencies vs. the dollar.

The Chinese renminbi was allowed to appreciate in the overnight fixing after China posted their latest Trade data. As I said above, the Chinese Trade Data was better than expected, and sometimes that can mean “not as bad as expected”, which would apply here. let’s take a look at the data. Chinese imports were expected to lose -10.1%, but only lost -7.6% year on year, and Chinese exports were actually “better than expected” posting an 11.5% gain vs. 10.5% expected (year on year).

So, I would have to say that this was overall, a good report from China. So far this week, we’ve seen better Trade Data, and growing reserves from China. Maybe they’ve turned the corner, and maybe they haven’t. Only time will tell.

I’ve been on the Singapore band wagon for the last couple of months. I told you previously a couple of times that I wrote a long article about Singapore and the Singapore dollar last month, and so my antenna are always up whenever someone writes something about Singapore. And so it was that Tony Sagami, of the Connecting Dots newsletter issued by Mauldin Economics had some very nice things to say about Singapore yesterday. Let’s listen in:

I’ll always be partial to Japan because I was born there, but from a business and investment perspective, Singapore is hands down the most exciting part of Asia. Singapore has an unmatched combination of modern comforts, sophistication, corporate transparency, and an energetic enthusiasm for commerce.

The Bank of Canada (BOC) meets today, and after the recent upgrade in the forecast for GDP growth in 2016, I would have to think the BOC would be on hold today. Besides, there’s not much left for them to cut with internal rates at 50 Basis Points (1/2%). The Canadian dollar/loonie has been on a roll in recent months, with their stealth-like rally, but there’s no rallying going on with the loonie today. Instead, we have the U.S. dollar in the driver’s seat, and tears are what we are seeing today in the currencies and metals.

In Australia, at one time last night, the Aussie dollar (A$) and kiwi were the best performing currencies of the night, with both up about 1/3rd cent, but then the trap door sprung, and the dollar green/peachback was there to gobble them up! Anyway, the latest Aussie employment data will print tonight (tomorrow for them).

I think I told you previously that with the Aussie employment being better than expected the past two quarters, I would expect to see some pull-back in the numbers. Employment still growing, but not on the same path as in previous months. I don’t think though that a pull-back is going to cause the Reserve Bank of Australia (RBA) to think about getting their interest rate powder wet. We should continue to be Steady Eddie with Australia and the A$.

On a sidebar — get ready for the next currency of the month, which will print this Sunday, I believe, and it will feature the A$! So make sure you look for that at your nearest newsstand, or your computer screen!

On another sidebar. I was excited, as usual, when I saw that my friend, Dave Gonigam over at the 5 Min. Forecast, put my names up in lights yesterday. He thought enough of my explanation of the end of strong trends that he printed it in the world famous 5 Min. Forecast yesterday. Thanks Dave!

Yikes! Gold has lost even more ground since I told you above that it was down $12 this morning. It’s now down $15, and in no danger of setting off bells and whistles alerting the price manipulators. I guess everyone couldn’t keep quiet yesterday, and woke up the price manipulators! HA!

I wonder if the guy over at HSBC, who just announced that “the U.S. dollar price of gold is in an uptrend with a bullish Elliot Wave structure.” Is wanting a Mulligan? His name is Murray Gunn, and is the head of technical analysis at HSBC. Elliott Wave technical stuff is pretty strong words, folks. You only pull out the fact that you understand Elliot Wave when you are absolutely, positively, sure that you are correct.

And Finally! The U.S. Data Cupboard  is ready to yield some market moving data to us today! March Retail Sales will print, and I’ve been over this previously, but for those of you who missed class last week and yesterday (where have you been?)  the BHI indicates that this will be yet another disappointing print. Not as disappointing as February’s negative -0.1% print, but disappointing nonetheless. For what is supposedly a “data dependent” Fed, this has got to really take the starch out of their collars!

And finally before I go to the Big Finish. The IMF was talking yesterday. My good friend, and retirementor, Dennis Miller, sent me a note highlighting the fact that the IMF was talking UP negative rates. Can you believe that? All I can say to that is that I’m glad I don’t live in a country that needs IMF assistance, for if ever there was a black cloud forming over a country it would be when the IMF steps in. I guess maybe you’re catching on here that I don’t hold the IMF in high regard. HA!

This is interesting, and something you won’t see on the TV news folks. But the prices of used cars are plunging. Does that tell us anything we should know? You bet it does or it wouldn’t be in the Pfennig! HA! So, here’s the link to the article, and here’s your snippet:

When we first warned that something was breaking in the American auto market, the Phil-LeBeau-ians crawled out of the woodwork to explain how everything is still awesome (brushing the weakness in stocks) despite soaring inventories and shrinking credit. Then when used-car prices began to leak lower, a few paid attention and the recent weakness in new car sales has shocked most. Now, however, used-car-prices are plunging at a similar pace to 2008.with only sports cars and pickups rising in price in the last 15 months.

Is this ‘the card that brings the whole house down.’

The reason for concern is lower used vehicle prices have a potential spillover effect to many other industry factors.

If we think about volume, price, mix, credit – all have been incredibly positive and supportive of the recovery. All are also no doubt related, but that’s what makes it a bit scary.

Chuck again. Yes, it’s these little things that begin to add up and when the house of cards comes crumbling down people will think back and say, “hey, remember that article that Chuck showed us that talked about used car prices plunging? “

That’s it for today. I hope you have a wonderful Wednesday, and be good to yourself!

Regards,

Chuck Butler
for The Daily Pfennig

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