In This Issue.
* No news is good news for euro.
* Dollar gets sold VS most currencies.
* RBA withholds comments on A$.
* China accumulates 315 Tonnes of Gold so far in 2015!
And Now. Today's A Pfennig For Your Thoughts.
It's Shrove Tuesday!
Good Day!… And a Tom Terrific Tuesday to you! Well? How was your Valentine's Day? I hope it was grand. The N.E. Coast got slammed with Snow again, and my hometown finally got a taste of a couple of inches of snow yesterday, snow biggie. HA! Down here in S. Florida, I don't have to experience any of that, thank goodness! I 've been wondering if longtime readers were noticing how I have not been whining and complaining about the cold of winter, and how I have to go where it's warm this year. That's all behind me now! Well, there's been no agreement between the Eurozone and Greece, and there are a couple more thing to catch up on from yesterday's trading, so, here we go!
With the U.S. on Holiday yesterday for President's Day, the overseas markets were pretty thin, and nothing out of the ordinary happened. The Eurozone and Greeks keep rattling their sabers, but nothing comes of meeting after meeting. In fact, last night could have been the last meeting to be held, unless the Greeks want to come back with their tails between their legs. For those of you keeping score at home. The current agreement to fund Greece, runs out at the end of this month. Experts have gone over the numbers and believe that Greece could get to the end of March before running out of cash. That would be the absolute last minute to come to an agreement, or. exit the euro.. I don't see the latter happening, so why not just accept the deal given to you now, Greece?
Now, one would think that hearing that the last meeting between the Eurozone and Greece had been held without an agreement, the euro would be getting taken to the woodshed. But that would be wrong! Just like last week, when the euro rallied on no news, it has done so overnight once again. I find this to be very strange, folks. But who am I to complain about something like this happening? The currencies, which used to be an asset class that I thought I had a very good handle on. If a country was debasing their currency, that was an easy call to make, If a country was printing money like nobody's business, that was an easy call to make, and if a country's leaders were acting like dolts, that was an easy call to make. But until those days return, it's all trader sentiment. And apparently, with the euro, traders have been thinking that 1. Either the euro fell too far too fast, and they need to reset the currency, or 2. No news that Greece is leaving is good news.
The Aussie dollar (A$) is the best performing currency overnight, and has climbed back over 78-cents.. This move all came about after the Reserve Bank of Australia (RBA) printed their last meeting notes. So, let me set this up. When the RBA cut rates at their last meeting, the markets went bananas and decided that if the RBA was that desperate to cut rates when no one was expecting it (although Chuck said there was risk that they could do so!), that the RBA would be ready to cut again at the next meeting in March, and the A$ got whacked badly. But the minutes last night said something different, and the expectations of a follow up rate cut in March were watered down, and then the key thing that was missing, was there was no mention of currency strength.
Now, you may recall that the RBA kept mentioning in each of their meeting minutes that the currency was overvalued compared to commodity prices. But this time, no mention of the currency's value. Does that mean the RBA is comfortable with the current level of the A$? , or. does it mean they were just too busy with the surprise rate cut, that they just didn't get around to talking about the currency? I have a feeling that it's the latter of the two, because. The RBA has mentioned a couple of times recently, that their target level for the A$ is 72-cents. Well, 78-cents is not 72-cents, folks. At this point, I would expect an RBA official to make a statement any day now that clears this all up and puts the markets back the scent of 72-cents.
So. What gives with the Swedish krona? Last week, Sweden's Riksbank, cut rates into negative territory and then later in their press conference they announced an implementation of Quantitative Easing/ QE. One of these things should have been enough to sink the krona, but two of them on the say day? Well, that should have deep-sixed the krona for more than 1 day. But, proving once again that strange is in these days. The krona is on the rally tracks this morning. Just another case of fundamentals being pushed to the side of the road.
The Norwegian krone has really put in a good two weeks of performances. Sure it traded off in sympathy to the krona on the Riksbank announcement, but then got right back on the rally horse the next day. The price of Oil has helped, as the price rose another buck to the $53 handle overnight. But I think it's more than that (Oil). Norway's inflation is above their target of 2%. I've highlighted this fact before and how Norway is the envy of most countries that would love to have 2% inflation right now, and with that greater than 2% inflation, the Norges Bank has to keep interest rates steady Eddie. So take that, the price of Oil recovering, and the fact that the Eurozone is still dealing with debt messes, and it's no mystery to me why the krone has rallied the past two weeks.
I have something more to say about the Sunday Pfennig in the FWIW section today, but in a follow up to the Sunday Pfennig where I talk about the British pound sterling, and how the data in the U.K. has gone soft, thus wiping out the chance for a rate hike, and causing the pound to lose ground, U.K. inflation printed this morning, it too printed softer than expected at .3%… I don't see how the Bank of England (BOE) can pull the dust covers off the rate hike machine with inflation that low. And BOE Gov. Carney and his bag of promises gets left on the porch once again. Imagine that. Who would have thought last summer that this economic recovery that would bring about rate hikes was just a mirage? Oh, that's right. Chuck did! Proving once again that even a blind squirrel can find an acorn now and then!
OK. stop the back slapping Chuck. You have nothing to be crowing about.. Anyone with an ounce of brains couldn't have seen that U.K. economic recovery for what it really was. So, put your head down and get back to work!
The tiny country of Singapore, just hasn't had much to crow about lately, and the Sing dollar (S$) has had a very difficult time. Add to that the black cloud that Japan cast over Asia, and the S$ is much weaker. You know, months ago, I told you that I worried about the Asian currencies given Japan's news that they were going to work to weaken the yen even further. You see, some yen weakness can be dealt with, but not the kind of weakness we've already seen in the yen, and then add in more weakness and life becomes difficult for the Asian currencies. Why? Well, these Asian countries are all in competition for exports, and if one country's currency gets too weak, it gives that country an unfair advantage. So, I saw what Japan was doing, and I expressed my concern about the Asian currencies, and it's now playing out.
Singapore did receive some better news, economy-wise, last night. Their Non-Oil Domestic Exports (NODX) actually surprised everyone with an unexpected rise of 4.3% in January VS the December print of 2.3%.. Pharmaceutical shipments were the biggest moving component, but electronics also were stronger. The S$ did gain a little bit on this news, but as I just described.They can't allow the S$ to get out of whack with the other Asian currencies.
Speaking of other Asian currencies, the Chinese renminbi saw a larger than usual move overnight, but in the wrong direction. the renminbi/ yuan was weaker. Thus putting that governor on the S$… My friend and former colleague at the Sovereign Society, Sean Hyman, sent me a note this past weekend with a link to story that was on MarketWatch that talked about how some analysts are calling for a devaluation of the renminbi from the Chinese Gov't. Right now, the Chinese Gov't is saying that the renminbi / yuan will NOT be devalued. I find it very useful to listen to the what the Chinese say, for they don't say things that they don't mean.
So, for now, until the Chinese say something different, I'm going to stick with their current thought that the renminbi / yuan will not be devalued. But. if the Japanese yen continues to get weak, that might all change for the Chinese. remember what I just told you about the competition for exports.
Gold is getting whacked again today. And just about all the gains that Gold made in January, making 2015 look like a promising year, have been given back in the past couple of weeks. All this rate hike talk in the U.S. has got the Chicken Littles running around and selling their Gold. Platinum is also getting whacked with Silver following, while Palladium ekes out a small gain today. Gold researcher extraordinaire, Koos Jansen, reported on Bullionstar.com this past weekend that China withdrew 59 Tonnes of Gold in week 5 of 2015, bringing their total to 315 Tonnes in 2015. So, the physical Gold accumulation for China continues… The Chinese are beginning to make a mockery of the Gold manipulators. And I hope they just continue to keep doing that, and doing that, and doing that!
The U.S. Data Cupboard doesn't have much for us today. Empire Manufacturing (NY region), and the TIC Net Flows, which I always tell you used to be important data, that no one pays attention to any longer, except me. Tomorrow, the Data Cupboard has a plethora of data to give to us, with the most important pieces being Capacity Utilization, and Industrial Production, which both saw huge chunks fall off when they printed last month. Speaking of which, can you believe that we are so far into the month of February already? The days are streaking by me, and I don't know how to slow them down!
Before I head to the Big Finish today. the Great Alvin Lee and 10-years After, are playing Goin' Home on the iPod. 42 years ago, I played in a band that traveled the country, and we always ended our shows with this song. Our guitar player, Donnie Phillips, did a great rendition of Alvin Lee's guitar playing on this song, and improvised with his own stuff. He was, and probably is still today, a great guitar player, and idolized Pete Townsend. Donnie lives in Oklahoma, and we last saw each other about 20 years ago. that's 2 times 10 years after!
For What It's Worth. Well, did you see our Sunday Pfennig this past Sunday? I had an idea to bring back our original marketing piece from the early days of EverBank World Markets. The original idea came from one of the founding members of EverBank.com and a marketing and writing genius, David Galland. I would write a piece each month about a currency, and then he would buy from a currency distributor the lowest denomination of that currency, and send it to all his publicity and media contacts. I always thought the idea was a very good one that went away when David left EverBank to run Casey Research. Nowadays he spends most of his time in Argentina, at Cafayate De Estancia.
So, when I stepped away from the day to day running of EverBank World Markets, to devote more time writing and finding ways to get more people excited about EverBank World Markets, I thought that we should bring back the Currency of the Month. But this time, highlight a currency, and let the dear readers find out about it. This time however, we would not only highlight currencies that we liked, but currencies that we were somewhat suspect of. You see, not every currency moves in tandem VS the dollar. So, I thought about it, and came up with two currencies that I wanted to show readers that we weren't always drumming up currencies we liked. The two: Japanese yen, and British pound sterling. Well, I thought that so much had been written about how Japan is a basket case, so I chose pound sterling. Many readers will recall my carrying on last summer when sterling was rallying, and I kept telling you that it was all about rate hike prospects that I thought would never materialize, at least in the timetable the markets were trading for! And so of the Sunday Pfennig, I went deeper into the reasons I'm not a fan of pound sterling.
I think that readers will see the familiarities between the pound and the dollar, the U.K. and the U.S. and if you didn't see it, then go back and read it again! HAHAHAHA!
Chuck again. (not that I left). So, each month, I'll highlight a currency, and it will either be a currency that readers should look at more closely, or a currency that they should not look at more closely. Fair and Balanced, right?
To recap. The currencies are mixed, with the majority of them booking gains VS the dollar this morning. No news from the Eurozone is good news for the euro, as it rallies even though the last meeting with Greece has ended without an agreement. In a case of really strange. The Swedish krona rallies even though they will now have negative rates and QE! The price of Oil adds another buck to its price, and the krone keeps the rally going. The A$ is the best performer overnight, as the RBA notes weren't as damaging to the currency as many thought they would be. And Gold is getting whacked again, even though there is news that China has accumulated 315 Tonnes of physical Gold so far this year.
Currencies today 2/17/15. American Style: A$ .7815, kiwi .7435, C$ .8080, euro 1.1425, sterling 1.5385, Swiss $1.0745, . European Style: rand 11.6010, krone 7.5060, SEK 8.3455, forint 269.00, zloty 3.6630, koruna 24.1750, RUB 62.28, yen 118.80, sing 1.3545, HKD 7.7585, INR 62.15, China 6.1330, pesos 14.83, BRL 2.8340, Dollar Index 93.89, Oil $53.40, 10-year 2.04%, Silver $16.78, Platinum $1,197.00, Palladium $784.25, and Gold. $1,221.48
That's it for today. Clouds are blocking the sunlight from the sunrise this morning, It's supposed to a record day for heat today, and then tomorrow night a record overnight low. Wow! A wild ride in temperatures, eh? Well.. Today is Fat Tuesday! . Party on Wayne, Party on Garth! It's that time of year again. for those of us with Irish blood in us, it's also called Shrove Tuesday. or Pancake Tuesday for you non-Irish people! HA! Here's the skinny on Shrove Tuesday. Derived from the word 'shrive' which means confess, Shrove Tuesday is a day people reflect on the areas of like in which they need to repent. Over Lent, which begins on Ash Wednesday, people would give up fat, eggs, milk and sweet things as part of their fast, so pancakes were a way of using up the leftovers in the cupboard you would not be using for the next 40 days and nights. So. load up on the Pancakes. My string of great nights of sleep, ended last night. I was up with a bad stomach a couple of times during the night.. UGH! Billy Paul, is on the iPod right now, with his song, Me & Mrs. Jones. a great old R&B song. So, don't go out and do anything really crazy today for Mardi Gras. Just regular crazy will be fine! And with that. go join your krewe, and have a Tom Terrific, Shrove, and Fat Tuesday!
Chuck Butler
Managing Director
EverBank Global Markets