In This Issue.
* The dollar is mixed this morning.
* Swedes go to the polls this weekend.
* Scotland vote is a week away.
* Is A$'s seeing Central Bank intervention?
And Now. Today's A Pfennig For Your Thoughts.
Dollar Best Week In 10 months!
Good Day! . And a Happy Friday to one and all! Today couldn't get here fast enough for me, as it's been “one of those weeks” and I feel lucky each day to get through it. The cloudy, rainy, chilly temps outside could be a part of the reason I feel like death warmed over this week, and the weather is supposed to be better this weekend, so, maybe about the time Sunday night rolls around, I'll feel better! HA! I don't mean to carry on about my long week, I just started typing and this is where I ended up!
It's been a long week for the currencies and metals for sure! And it appears we'll end the week with the dollar mixed, but up big against the Aussie dollar (A$), and down big against the Indian rupee! Funny, eh, that I spent a ton of time talking about the Indian rupee yesterday, and then have the rupee rally like this overnight? On a sidebar, about 10 years ago, I had a dear reader, who used to send me emails, accusing me of “moving the markets” with my letter. I always got a huge laugh over those emails. As if! He should have been sending those emails to Goldman Sachs!
The Russian ruble is getting whacked again this morning, as today is the day the U.S. is supposed to outline their latest set of sanctions on Russia's financial, energy and defense sectors… The European Union announced their new sanctions earlier this week. From what I read, Russia is preparing a response.. You don't think the Russians would target car import from the EU do you? Well, if I were mother Russia, I would do just that! Look, I'm not taking sides here, I'm just saying that it's a do onto you and you would do onto me.
I really don't like talking about that stuff because it borders on politics, but the thing to think about here is that car imports from the EU will affect Germany's auto sector. And that's really all I should be talking about.
Another YouGov poll on Scottish Independence was published last night. This was the outfit (YouGov) that published the report over the weekend, last, that showed the 51% “yes” vote. and sent pound sterling to the woodshed. Well, the latest YouGov poll says that they have 50% “yes”, 45% “no” and 6% “undecided”. OK, I know it's been years since I took a math class in school, and since then they introduced “new math”. But even using the wimpification of American kids version of math, 50+45+6 = 101. I don't see how the YouGov numbers work, but the key here, after I spent a couple of minutes making a point that could have been made in 30 seconds, is that this latest poll wasn't as harmful to pound sterling as the weekend, last, version. In fact, pound sterling is flat to up a shekel or two this morning.
The Swedish krona is weaker again this morning, and this time I think I agree with the move, as the Swedes will go to the polls this weekend to elect a new Gov't, so the “unknown” or “uncertainty” is hanging over the krona this morning like the Sword of Damocles. The latest opinion polls have the old Gov't getting thrown out on its ear, and a new Gov't installed to see what they can do to turn the Swedish economy around.
The same kind of “uncertainty” is hanging over the Brazilian real, as the Brazilian Gov't election is now just a month away, and the polls are shifting back and forth with every print. It has to be a case of “election blues” that's causing the real to weaken this week, for Brazil and the real enjoy the best rate differential VS other currencies in the world! (OK, there could be a tiny country somewhere on a mountaintop that claims a better differential. you know what I mean here!) I mentioned on the desk yesterday that Barclays had issued a research report where they say they are going overweight, reals. Ty responded that they must be basing that strictly on the upcoming election, and betting that the Rousseff Gov't gets show the door. I agree. And when you see reals getting pushed lower all week, you begin to salivate about the opportunity to buy them at a cheaper level!
A headline on Bloomberg this morning says that the dollar will end the week with its best weekly performance in 10 months. Yes, it's been a good week for the dollar, folks. But then, I think I rang the warning bell at least a month ago that we could be in for a bout of dollar strength. No, it's not the way it should be, but we've seen these short-term dollar rallies come and go through the last 12 years, with the dollar always returning to the underlying weak trend. This particular dollar rally just might test a lot of investors' resolve, because it's going to carry out over several weeks, and the media will be gushing with strong dollar stories, so much so, that you might even begin to believe it. I suggest that you adopt the Paul Simon words to the great song, The Boxer, here. A man hears what he wants to hear, and disregards the rest.
The Shanghai Gold Exchange is all wound up and ready to spring next week. Since there has been no safety nets thrown to Gold's decline by the Chinese institutional buyers the past couple weeks, as Gold has steadily dropped lower and lower, I would have to believe that these Institutional buyers are saving up for the opening of the Shanghai Gold Exchange (SGE) so that the SGE can make a HUGE splash! The problem is that Gold has now fallen so low, that what the Chinese do next week might be a case of too little, too late.
Speaking of China. China and Russia, are meeting with other members of the Shanghai Cooperation Organization (SCO).. This is where China & Russia agreed to more cooperation in pricing the terms of transactions in their respective currencies, and dropping the use of dollars. the Russian First Deputy Prime Minister said, “we are not going to break old contracts, most of which were denominated in dollars. But we're going to encourage companies from the two countries to settle more in local currencies, to avoid using a currency from a third country.”
That's kind of funny, that Russia's Deputy Dawg referred to the U.S. as a “third country”. Hey! At least he didn't refer to us a “third-world country”!
On a sidebar regarding Russia. It appears to me that the Central Bank of Russia (CBR) will be hiking rates very soon. Inflation is rising in the country at a quicker pace than the CBR had anticipated.
But isn't that the way it goes all the time? A Central Bank invites inflation into their economy, and has the misguided feeling that they can control it. Then they find themselves behind the inflation 8-ball, and have to start raising rates quickly, but it's too late, baby, now, it's too late, though we really did try to make it.
Al Stewart is playing: Time Passages on the IPod right now, so I'm going to take a short break, so I can sit back, relax, close my eyes, and listen to the song. Be back in a minute or two.
OK, I'm back now. Did you miss me? HA! Well, Chinese leaders are busy this week, as they close the SCO, they headed home to Beijing to hold the China Gold Congress, with co-sponsor the World Gold Council (WGC). Again, I'll repeat something I wrote about last week. The WGC is completely lost on what China holds in terms of Gold reserves. The WGC believes that China's Gold accounts for one third of global demand. I do believe they are so far off base, that an old man like me could pick them off!
Well, I mentioned above that the A$ is getting whacked again this morning. It just doesn't make any sense to me, why this is happening. Nothing has changed in this past week, but a week ago, after the very disappointing U.S. Jobs report printed, the A$ rose to 94-cents. This morning, one week later, it's trading around .9050. OUCH! I told you the other day about how the A$ had finally fallen below its 200-day moving avg., thus making it the last major currency to succumb to the U.S. dollar's strength. Yes, the Reserve Bank of Australia (RBA) could be behind this downward move, for they have not been a fan of the A$'s strength, mentioning that several times in the past couple of months. I would hope not, for I don't like Central Bank intervention!
I also mentioned above that the Indian rupee is stronger this morning. I was doing some research yesterday on India, as I have been assigned the Sunday Pfennig in a couple of weeks, and I'm going to talk about the BRICS. You know, it'll be a preview for something related to the BRICS. I can't divulge that info just yet, but I thought I would whet your whistle a little. But, getting back to India.. Did you know that India has the highest internal interest rates in Asia? Even higher than Indonesia! So for foreign investment into India, they are treated nicely. And I was always taught that money goes where it's treated the best! I guess that's why I spend so much money when I go to a baseball game! HA! No wait, that doesn't make any sense, Chuck! Oh well, you get the point!
The euro was on the rally tracks for a short-run yesterday, with the single unit climbing to 1.2950, but has given back 25 ticks this morning. I just don't see this Russian sanction thing playing out well for the Eurozone and the euro, folks. I told the boys and girls on the trading desk yesterday, well, at least I said it to them, I can't vouch for whether they listened to me or not, but I told them nevertheless that I believed the Russian / Ukraine conflict would be over soon, and things could get back to normal there, which means the sanctions would be allowed to be lifted. Hey! One can hope, right?
The U.S. Data Cupboard finally has something to look at today that could move the markets. August Retail Sales is on the menu today. More on that in a minute, but first, yesterday's offerings from the Data Cupboard. The weekly Initial Jobless Claims rose from 304,000 the previous week to 315,000 last week. And the U.S. Monthly Budget Statement for August printed at a deficit of $128.7 Billion! The July deficit was $147.9 Billion. And we are supposedly spending less? Yes, from July to August it was less, but I'm talking about the big picture here folks.
So, earlier this week I told you that the BHI had indicated that the August Retail Sales would be better than July's flat performance, and after taking out car sales, which will be HUGE, core sales will be around +.2%… Sure that's better, but it's simply not the stuff that strong economies hang their hats on. But, I'm sure the spin doctors, will spin this somehow to make the rate hike campers happy and begin dancing in the streets.
We'll also see the U. of Michigan Confidence report for September today. Remember these Confidence reports are all about the stock market, so figure a good showing today on this report.
For What It's Worth. Every day I receive an email from MarketWatch, that usually has at least one article I want to read. Yesterday was no exception. And the article plays well in the sandbox about my soapbox rant the other day about U.S. Consumer Credit (read debt!) exploding higher. Here's a snippet from the MarketWatch article.
“U.S. consumers may be relying too heavily on their plastic.
Americans added $28.2 billion to their credit cards in the second quarter of 2014, the largest amount in the last six years and nearly 200% more than in the second quarter of 2009, when the economy emerged from the depths of the Great Recession, according to new research from personal finance website CardHub.com. After paying off $32.5 billion owed during the first quarter of 2014, consumers ran up roughly 86% more debt during the following quarter.
The average household's credit-card balance now stands at $6,802, up slightly from $6,628 in the first quarter, but still down from $8,431 at the end of 2008. By the end of the year, this figure is expected to exceed $7,000, reaching levels not seen since the end of 2010. U.S. consumers will be roughly $1,300 away from the credit card debt “tipping point,” where minimum payments become unsustainable and delinquencies skyrocket, the report says.”
Chuck again. Yes, as I keep saying, we never learn anything, and. these people act like 2008 never even happened! I know ServPro advertises that saying, but they are talking about major cleanups that are needed! Oh well, if you want to read the entire article you can by clicking here: http://www.marketwatch.com/story/american-credit-card-debt-hits-new-highs-2014-09-11?dist=countdown
To recap. The week will end with the dollar enjoying its best weekly performance in 10 months. The currencies are mixed today, but Gold and the other precious metals are all down to end the week. The A$ is worst performer overnight, Chuck suspects that some Central Bank intervention to weaken the A$ is in play here, and the Indian rupee is the best performer overnight. Sweden goes to the polls this weekend, and uncertainty has hit the krona. The latest Scottish Independence poll is spit. and Chuck questions their math!
Currencies today 9/12/14. American Style: A$ .9065, kiwi .8170, C$.9055, euro 1.2935, sterling 1.6240, Swiss $1.0695, . European Style: rand 10.9655, krone 6.3720, SEK 7.7505, forint 243.50, zloty 3.2445, koruna 21.3470, RUB 37.85, yen 107.25, sing 1.2605, HKD 7.7505, INR 60.65, China 6.1468, pesos 13.24, BRL 2.2975, Dollar Index 84.27, Oil $93.21, 10-year 2.56%, Silver $18.61, Platinum $1,362.50, Palladium $828.00, and Gold. $1,237.80
That's it for today.. Well, I see on the internal calendar that today is one of my fave people's birthday! Happy Birthday Kathy Glowski! Kathy and I have worked together off and on going back to 1982. WOW! That's a long time, she must have just gotten out of high school at the time! She recently told me that she had fibbed to me in our interview but she got the job, and she was feeling guilty all these years! HA! Cardinals come limping home, going 4 & 4 on the 8 game road trip, for their last home stand of the year! I really wanted to go out somewhere last night, but then was tied to home with my bad stomach. UGH! Maybe tonight! Although right now, that doesn't look good. My beloved Missouri Tigers play UCF tomorrow, they'll need to show that they can play stronger defense in this game. Go Tigers! And with that. I thank you for reading the Pfennig, and hope you have a Fabulous Friday!
EverBank World Markets