In This Issue.

*  Bias to buy dollars enters the currencies.
*  Krona, renminbi, and Gold buck the dollar bias!
*  Euro rallies and then gives it all back!
*  Palladium reaches a 14-year high!

And Now. Today's A Pfennig For Your Thoughts.

Swedish CPI Mocks The Riksbank!

Good Day! And a Tub Thumpin' Thursday to you! It will be Argentina VS Germany for the World Cup on Sunday, as yet another high level game was decided by penalty kicks. UGH! But that's the rules of the game, so be it! I'm near the bottom of all the people that picked the games of the World Cup Tournament Pool that I entered. Which means I don't know Jack about teams from Nigeria, or Iran, etc.  But I did pick Argentina to win it all, and I still have a chance there! Our own soccer legend, Ty Keough, has a fave player and it was Diego Maradona from Argentina. Any discussion we have on the desk about soccer players, always ends up with a story about Maradona from Ty.

Just like any discussion I ever have with anyone that wants to know what I do, always ends up with me talking about debt in the U.S.  I just don't know how the debt in the U.S. isn't on everyone's minds. Yes, I know, there are quite a few Americans that don't believe that this debt is going to be a problem, and we should just keep buying stocks and forgetting about what's buried in the closet. Our “leaders” are very good at “forgetting” about the debt. And our Central Bankers just turn the other way. So, I always take it upon myself to make sure that anyone I talk to for the first time realizes the dire straits we are in as a country with regards to debt.

OK. The currencies were led higher VS the dollar yesterday by the Big Dog euro. I told you yesterday about the statement that was made by ECB member Coeur, who said that, “It is wrong to say that the euro is too strong”. After this comment made the rounds here in the U.S. traders began to push the envelope of euro strength, higher and higher. The euro pushed to 1.3640 by midday, but things have moved against the euro in the overnight sessions, and it is back down to 1.3625, as I write. In fact, the overall tone of the currencies this morning is one of a bias to buy dollars.  The Fed's FOMC Meeting Minutes revealed that even though Fed Chair, Janet Yellen, says that she's not seeing any asset bubble, some Fed members expressed concern that investors are getting too complacent and that will push the Fed Members to be on the lookout for excessive risk-taking..

Now wouldn't it be nice, if we could wake up in the morning when the day is new, NO! Wait! No time for the Beach Boys! I'm saying that wouldn't it be nice if the Fed Members would have told us what they plan to do, if (and that's a BIG IF) see investors taking on excessive risk. The problem is, folks. I'm sure they don't know.  But I'll step back here and remind everyone that when the last stock market bubble was going strong, I was adamant about how the Fed should raise the initial margin requirement, and maintenance requirement, that would have knocked the stuffing out of the euphoria in the stock market. And so, I'll step back up on the soapbox and try to get a message through to the Fed and remind them that they have that power to raise the requirements on margin accounts, and what a wonderful tool that would be to use!

So. Anyway, now that I've said all that, I'll come back to the fact that the Fed Meeting Minutes really started all this turnaround in the bias for the dollar. The dollar was assisted in its reversal of fortune overnight by a labor report in Australia, which showed that employment growth was stronger than expected, BUT. the Unemployment Rate rose to 6% (from 5.9%), and apparently this 6% rate was quite psychological for the Aussie dollar (A$) got taken to the woodshed, and has not come out of it yet this morning.

Recall that on Monday this week, I told you that later in the week the data and other stuff would return, and it all began yesterday afternoon with the Fed's Meeting Minutes, then the Aussie Labor Report, and Chinese data and so on. One of those “so on” things is the Bank of England (BOE) meeting that's going on while my fat fingers type away. What do you get when you work your fingers to the bone? Bony fingers! HA!  But the BOE isn't going to change anything right now, even though BOE Gov. Carney, told everyone last week that “interest rates would be going up sooner than thought”.The pound sterling has been drifting ever since the negative IP print earlier this week, and will continue to do so, after the BOE doesn't upset the apple cart..

There are a few currencies that are bucking the bias to buy dollars this morning. The Biggest move came from the Chinese renminbi / yuan. Chinese June Trade Data printed overnight, and showed that while things were not as vibrant as they thought they might be, the data showed that the economy has stabilized and growing albeit at a slower pace. For those of you keeping score at home, the Chinese Trade Surplus was $31.6 Billion ($36.9 Billion was expected). But I don't think the data had anything to do with the large appreciation in the renminbi. I put that down to Chinese games. The games the Chinese play whenever they are visited by U.S. officials. They allow the currency to appreciate for 3-5 days, so they can point to that and tell the U.S. officials that they are doing whatever they can to boost the currency VS the dollar.

For the first time this year, Swedish Consumer Inflation (CPI) was an upside surprise!  Surprise! Isn't that just grand? Just last week, the Swedish Central Bank, the Riksbank, threw the krona under the bus, by cutting interest rates, only to see inflation rise at a fast pace the next week. That's what the Riksbank gets for cutting rates and debasing the krona!  In Chuck's world, where data, and currencies and stuff are alive and animated, I can see Swedish CPI mocking the Riksbank, saying neener, neener, neener! 

Well, needless to say, but I will anyway, the krona is on the rally tracks since the CPI report printed and is a close second to the renminbi / yuan in appreciation VS the dollar this morning. Also, here are the numbers in case you want to record them. Swedish CPI was up .8% year on year (from .5%) So, yes, CPI isn't a problem here, but when you see increases like that in one month you begin to wonder if this is a new trend, and when you add in that fact that the Riksbank just cut rates last week, the thought of a new rising inflation trend isn't that difficult to fathom!

And the other currency that is taking liberties VS the dollar this morning is Gold. Gold is up $15 this morning..  And don't look now (OK look if you want to!) but Palladium has reached a level that it hasn't seen since 2001. But coming back to Gold. Everything I read, including the Economist, says that tensions in the Middle East are rising, and that the ISIS group is just building their arsenal to ready for a huge strike. So with stuff like that out there, you can figure out very quickly why Gold is rallying. Forget the rate talk, this geopolitical stuff is riding herd on Gold right now.

It will be interesting to watch the trading in Gold unfold from here, as this $1,330 level that Gold is approaching has been a real key resistance level. Of course, that is, as long as the price manipulators keep their hands out of the cookie jar.

Well, the Big Surprise from Canada yesterday that under lock and key turned out to be a big nothing. And the Canadian dollar / loonie was set adrift with the other currencies bowing down to the U.S. dollar this morning.

The Indian rupee was back over the 60 handle this morning, and one wonders if the Reserve Bank of India (RBI) is intervening again, given the fact that the price of Oil has retreated once again, and is now below $102 this morning. The rising price of Oil was given as the reason for the downward move in rupees a couple of weeks ago, so one would believe that a dropping Oil price would help the rupee recover. That is, unless there was some intervening going on to help exporters. The RBI has a history of doing just that. I thought that when new RBI Gov. Rajan took over last summer that this intervening would end, given the inflation problems in India. For we all know, and I'm sure he does too, that a strong currency goes a long way toward combating inflation pressures! 

Basically, I think that the RBI wants to see the rupee here at 60. So, get used to it for now. Let's see what the new Indian leader, Modi, presents to unlock the economy, and then maybe the RBI won't stand in front of rupee strength.

The U.S. Data Cupboard still doesn't have much to view this morning, with the usual Tub Thumpin' Thursday fare of Weekly Initial Jobless Claims on the docket. and then some minor data prints. Next week, we get back on the Data Express with stuff like Retail Sales, which the BHI tells me we should be looking for a better number in June than was printed in May.  We'll also see two of my fave prints, Industrial Production and Capacity Utilization. I'll be long gone on vacation when the good stuff begins to print, and I probably won't be checking to see what they do, or how the markets react, as I'll be busy trying to keep tourists from attempting to roll me back into the ocean! HA!

And then back to the other metals for a minute. I mentioned above that Palladium had reached a level that it hadn't seen since 2001, according to the Bloomberg. That level was $875.  Let me go over this move in Palladium the past year. Last September, Palladium was trading around $681.  So, fast forward to now, and it's $875. That's a cool 22% gain in less than a year! And I don't think for one minute that Palladium is finished with rallying. Remember what I told you about Vehicle Sales, well, Palladium and Platinum will continue to be underpinned by those Vehicle Sales.

For What It's Worth.  I mentioned our own soccer legend, Ty Keough, above, and that jogged my memory to something that Ty had sent me yesterday that he saw on MarketWatch.  So, let's see what Ty had on his mind before he took off to play in the over 55 soccer championship this weekend!

“German and French companies are using renminbi to trade (RMB) and now, increasingly, American businesses are too.

More U.S. businesses are using RMB to settle trade and more plan to use it amid expectations by business leaders that their trade with China will increase in the next 12 months.

Seventeen percent of U.S. businesses leaders said their companies had used RMB to settle trade this year, up from nine percent last year, according to an HSBC global survey of international business decision makers in 11 countries, including 102 in the U.S. The global average was 22 percent. This places U.S. businesses just behind French (26 percent) and German (23 percent) businesses in terms of RMB use outside of China, Hong Kong and Taiwan.

Furthermore, 22 percent of U.S. businesses, who aren't already using RMB, said they plan to use it within the next six months to five years, up from eight percent a year ago. Globally, an average of 32 percent of leaders said they planned to use RMB in the future.

“As China continues to internationalize its currency, there are more opportunities and considerations in trade, investment, cash management and funding for U.S. companies,” said Steve Bottomley, Group General Manager, Senior Executive Vice President, and Head of Commercial Banking for North America, HSBC Bank USA, N.A. “U.S. businesses are becoming more comfortable using RMB and are increasingly making it, or looking to make it, a part of their competitive strategy and planning.”

Still, most U.S. businesses surveyed said they don't use RMB because they don't understand or aren't aware of the benefits of using it.

However, two-thirds of companies in mainland China and Hong Kong said foreign firms doing business with China gain financial and relationship advantages from using RMB, including receiving discounts on RMB-denominated transactions. Additionally, global leaders said the top reasons for using RMB were meeting demand from counterparties, minimizing foreign exchange risks and increased convenience.”

Chuck again. So, the wider distribution of the renminbi is really spreading its wings, and still people in the U.S. just don't get it! And then one day, it'll happen. the renminbi will take over as the reserve currency, and sends the U.S. economy to its knees, and everyone, except you dear Pfennig readers, will say, “How'd that happen?”  and “What happened to our dollar?” 

To recap. The currency rally that had gone on this week up to yesterday afternoon, was suddenly turned around to a dollar rally. It may have been the Fed's Meeting Minutes, and then it may have been something else, like safe haven buying due to the tensions in the Middle East rising once again. Gold is rallying on the geopolitical pressures, and Palladium has reached a 14 year high!  The BOE left rates unchanged this morning, and Swedish CPI was mocking the Riksbank by rising at the fastest pace in a year, just a few days after the Riksbank cut interest rates.

Currencies today 7/10/14. American Style: A$ .9365, kiwi .8805, C$ .9370, euro 1.3615, sterling 1.7115, Swiss $1.1210,  . European Style: rand 10.7250, krone 6.1540, SEK 6.7735, forint 228.05, zloty 3.0430, koruna 20.1650, RUB 34.01, yen 101.35, sing 1.2430, HKD 7.75, INR 60.20, China 6.1443, pesos 13.00, BRL 2.2115, Dollar Index 80.12, Oil $101.98, 10-year 2.52%, Silver $21.50, Platinum $1,515.25, Palladium $872.55, and Gold. $1,342.50

That's it for today. Another nice win for my beloved Cardinals last night. Incense And Peppermints is playing on the IPod, now that's an oldie! No cheating on Google, Bing, or Ask, but a Gold Star to who can name the band that played that song! Oh, I think I've mentioned the band here before so that should be a layup. I finished my main stage presentation for Vancouver yesterday, and now have to work on the Workshop presentation. I totally dislike putting these things together, as I'm not the most proficient Power Point person! But I make do. I guess I could have taken the time to be proficient, given all the presentations I used to do, but these days, I do two maybe three a year, so what's the use? Besides this way I can complain about doing them, and that's more fun! I just talked to our little Christine, she's bringing in breakfast sandwiches for the desk today, I'm so excited, for I'm so hungry!  I left my cell phone at home this morning! Oh heavens! What will I do without it? HAHAHAHA! Well, it's that time of the morning. time to go out and make this a Tub Thumpin' Thursday. I hope you can do that!

Chuck Butler
EverBank World Markets