In This Issue.

*  Dollar sell off takes a pause.
*  German data sends Euro toward $1.10.
*  Brazil's currency drops.
*  Metals continue to drift higher.

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

The dollar sell off pauses.

We will again start todays Pfennig off with some thoughts from the big boss Frank Trotter:

Saint Louis, Missouri – A few clouds and drizzle greeted me back here at the office in Saint Louis.  I can usually see the Arch from where I sit but right now the seeing other side of the road would be a pickup in visibility.  It was a chilly return to the desk but still nice to be back amongst the EverBank team.

Visibility is also absent from the markets as the on-again off-again guidance / analysis / speculation about the pathway for rates here in the USA.  The ten-year US Treasury note sits about 1.87%  as I write this afternoon.  I am puzzling a little as to why Spain only need pay 1.28% on their ten-year notes.  Let's see – I think that's a higher credit risk.  At present their currency, the euro, is down significantly with no market talk about a recovery, and well Spain hasn't generated very much useful since discovering and extracting the riches from the New World in the 16th Century.  Those using value investing as a guideline must be very short that issue indeed.  Greece at least feels better priced at 10.57%.

Just up there I noted there is no market talk about a recovery in the euro, but actually the US dollar has fallen off a bit in the past week or so.  Interesting.  In parallel I've been thinking about the Russian Ruble more lately.  Did I miss the blood in the street opportunity?  Will more trouble and woe beset the currency?  Could it be a time to buy now?  Don't know.  We do hear a little discussion about an "inflection point" in the euro.  Not sure that it's there yet given the rate rises still baked in to the market's expectations here in the USA, but somewhere around here maybe it begins to happen.  We'll wait and watch and see when we think it's safe to go back into the water.  Some may jump in before we do and benefit from their timing, others may need the lifeguard's assistance.  Keeping an eye on it though seen through the mist.

Thanks again to Frank for his thought provoking comments which lead us off today.  Frank points out that the dollar has fallen off in the past week or so, but the dollar bears took a break yesterday as the dollar steadied itself against most of the major currencies.  Data released here in the US yesterday indicated that prices are heading higher – granted at a much slower rate than most in the Fed would like to see but a rise is still much better than the alternative.  The YOY 'Core' rate showed a 1.7% increase, creeping closer to the 2% goal which Janet Yellen has suggested is needed before rates will move higher.   Another piece of data showed Manufacturing here in the US is expanding at a faster pace than expected.  Markit US Manufacturing PMI for March came in at 55.3 vs. an expectation of a 54.6 reading.  Any number above 50 indicates expansion of the manufacturing sector.  Finally, New Home Sales for February showed a surprising increase of 7.8% vs. expectations of a drop of 3.5% MOM.  Last month's sales were also revised higher to an increase of 4.4% vs. the original reading of -.2%.

The euro was one currency which continued to climb vs. the US$ after data suggested Germany's manufacturing sector is growing faster than expected.  German PMI data released yesterday jumped to a four year high, and data released this morning showed German business morale is at the highest point since July of last year.  The positive data has some analysts raising their growth expectations for Germany to more than 2 percent for 2015 (Germany grew by 1.6% during 2014).  Since Germany is Europe's largest economy, the news is good for the euro which is slowly ticking up toward the $1.10 figure.

The pound sterling dropped after data yesterday showed British inflation dropped to zero last month – the lowest reading since records began.  Readers will recall that the BOE was 'in front' of the US FOMC in instituting QE and many thought they would be raising rates long before the US.  But recent data suggests the UK economy is not performing as strong as many had thought, and with inflation in danger of jumping over to deflation the BOE is not likely to raise rates any time soon.  The pound sterling had run up on interest rate expectations, and is now dropping as those expectations fade (sound familiar??  Remember – the US policies have been following the UK on a slight delay).

Brazil's currency weakened about 1% against the US$ on Wednesday after Brazil's central bank announced that it will not extend its currency intervention program past the end of the month.  Brazil's central bank had been buying reals and selling dollars in support of the Brazilian currency.  However, the central bank did say they would be rolling over swaps which expire later this year, which helped to steady the drop in the real.

Precious metals continued to drift higher yesterday, with Gold approaching the psychologically important $1,200 level.   The gains yesterday finished off a fifth straight day of positive returns for Gold and if we get another day of gains it would be Golds longest consecutive winning streak since January of last year.  The sharp selloff of the dollar is being seen as the main reason for the rise in the price of Gold, as investors have pushed their expectations of a first interest rate increase from June toward the end of the year.  Silver also booked gains, and both Platinum and Palladium are moving higher this morning after a slight decrease yesterday.  Good news all around for precious metals holders.

Currencies today 3/25/15. American Style: A$ .788, kiwi .7670, C$ .8013 euro 1.0988, sterling 1.4920, Swiss $ 1.0445.  European Style: rand 11.78, krone 7.8238, SEK 8.4664, forint 271.79, zloty 3.7185, koruna 24.898, RUB 56.91, yen 119.35, sing 1.3671, HKD 7.755, INR 62.3804, China 6.141, pesos 14.888, BRL 3.1263., Dollar Index 96.785, Oil $47.83, 10-year 1.86%, Silver $17.05, Platinum $1,149.60, Palladium $763.97, and Gold. $1,198.15

Running late this morning, so I'll just hit the send.  Hope everyone has a Wonderful Wednesday!

Chris Gaffney, CFA
EverBank World Markets