In This Issue.

*  FOMC lowers some forecasts.
*  Most currencies & metals rally.
*  Pound recovers from dovish BOE statement.
*  Krone gets taken to woodshed.

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

Yellen Deep Sixes The Dollar.

Good Day! .  And a Tub Thumpin' Thursday to you! I'm not much in the mood to Tub Thump, but maybe later today. Our little Christine is bringing in a cake donut for me this morning, so maybe that cure will help. I really don't mean to go on and on each day about how I feel, and I apologize to you for that. It's just when I start with a blank page, and my mind starts to think about what to write, the next thing I know, I'm writing about my stomach problems! UGH!  The band Missouri, is playing their hit song, Movin' On, right now on the IPod, and I think that's just what I need to do. Move on.

Well, the Fed's FOMC meeting and following press conference was a doozy yesterday, or was it a snoozy? Doozy / Snoozy what's it gonna be boy? Well, I guess it all depends on your viewpoint of what Janet Yellen had to say. At first, all the news outlets were reporting that Yellen had modestly increased the projected pace of policy tightening in 2015 and 2016. And that was dollar supportive. But then, these same news outlets decided to listen to the rest of what she had to say, and that, my friends, was not so dollar supportive!

Yellen said that the Fed had lowered its projection of near-term growth, lowered its unemployment rate forecast, and raised slightly its 2014 inflation forecast. I think in the end, what the Fed is saying is: “We're still not so sure about this economy, but if all things are equal, and there are no disruptions, that interest rates will slowly rise in 2015, and probably end 2015 around 1%.”  Of course that's my interpretation of everything that was said yesterday. I'm sure Janet Yellen doesn't appreciate Chuck Butler, in St. Louis, Mo, (home of the 11-time World Champion Cardinals) talking for her, or putting words in her mouth. But, I'm just trying to make things understandable to the everyone. You see, not everyone is Ivy League educated and understands Fed-speak.

So, as I said above, the rest of what Yellen had to say, really put the dollar out on a line. And that has held true through this morning's session. The Big Dog euro is leading the way with the assault on the dollar this morning, as the single unit has traded up to and through the 1.36 figure, which is not going to make European Central Bank (ECB) President, Draghi, a happy camper this morning. He's got to be thinking, “What do I have to do? I throw the euro under a bus last week, and this week the Fed does the same to the dollar!, ”  I bet he's wondering now if he should just raise the white flag and surrender. The euro is the offset currency to the dollar, and no matter what Draghi does, the Fed ups the ante, and makes the dollar weaker, which then by virtue of being the offset currency to the dollar, the euro rallies.

Sure this could be a short-lived rally in the euro, but I think it spells out the problems that Draghi has in his attempt to weaken the euro to disengage deflation in the Eurozone. You know, you would think that he (Draghi) would have taken a look at what Japan has tried to do to disengage deflation for the last 25 years, and steer clear of anything they did, for apparently, it didn't work! But Noooooooo! He went right to the cutting interest rates to zero, and he still has bond buying in his back pocket to pull out at any time. He did try something new with his negative deposit rates for deposits at the ECB, but I doubt that has the success he thinks it will.

One currency that's not participating in the dollar weakness this morning is the Norwegian krone, who is getting whacked hard this morning. The krone's trip to the woodshed, was caused by some definite change in the wording of the Norges Bank's policy statement following their no change rate announcement this morning. Norges Bank said, “There are prospects that the key policy rate will remain at about today's level to the end of 2015, followed by a gradual rise.”  Previously the Norges Bank had referenced mid-2015 for rates to rise.  So, evidently, the Norges Bank and its head, Olsen, liked what Yellen did to the dollar yesterday, and decided to pull the same rabbit out of his hat  UGH!  

Another currency not participating in the U.S. dollar's weakness although not getting taken to the woodshed like the krone, the New Zealand dollar / kiwi is just flat this morning. Remember, a lot of kiwi's rate advantage has already been priced into the currency, so this non-move this morning is nothing to shiver me timbers, as Popeye would say!  1st QTR GDP in New Zealand printed last night and showed a 1% rise VS the previous QTR, or 3.8% year-on-year. I think this puts the Reserve Bank of New Zealand (RBNZ) on pace to hike rates again this year, and the close we get to that becoming a reality, is when kiwi will get on its rally horse and go for a ride again. Of course that's my opinion, and I could be wrong!

The Swiss National Bank (SNB) meeting yielded nothing to speak of, as they left everything unchanged, including their forecasts, and the reaffirming the 1.20 euro/ franc cross floor. So, nothing new here, move along for these are not the droids you're looking for!

The Peoples Bank of China (PBOC) decided to allow the renminbi / yuan to appreciate overnight. Wasn't that nice of them? And the Indian rupee saw some love overnight with a rally of its own. The Big story in India right now, is how are they and their economy going to weather the storm of higher Oil prices?  The Reserve Bank of India (RBI) advisor earlier this week thought that they would be able to weather that storm, and I think that this is a tough test for the new Indian leader, Modi, who barely has broken in the leader's chair!  If he's made of the stuff that I've read that he's made of, he'll guide India through this. So, I think it's only fair that the markets give him an opportunity to do so, without dragging the rupee through the mud , and causing all sorts of problems from the get go.

The Canadian dollar / loonie, is rallying very nicely this morning. Bloomberg is reporting this morning that Canadian Finance Minister, Joe Oliver, announced that he was holding talks with the Chinese Gov't about establishing a trading hub for the renminbi / yuan in North America. Way to go Joe! Step up to the plate and knock the cover off the ball!   I'm not saying that this story has anything to do with the rally in the loonie overnight, as that is probably all about rate differentials, (remember Canada has higher rates than the U.S.). I'm just trying to show how proactive the Canadians are here.

And then the British pound sterling. Earlier this week I told you that pound sterling had traded over 1.70 but then lost the figure on profit taking. Well, this time pound sterling has passed 1.70 and looks like it will stay there today! This run in pound sterling, as I told you a couple of weeks ago, really caught me by surprise, and I wasn't completely sold on it, but might as well, participate while the gettins' good.  It looks like pound sterling has more ground to cover and its doing it the right way by not gapping up and leaving huge holes that have to be gone back over and covered.

Gold saw a nice rally yesterday that wasn't interrupted by the FOMC. You know, the stupid CPI surprise the other day really is beginning to gain some traction. The great James Grant, in a MarketWatch article yesterday, said that “The Federal Reserve is pouring fire on the glowing embers of inflation. The Fed with a remarkable lack of self-awareness, is now deploring complacency of the capital markets, with the Fed having administered the sleeping potion.”

WOW! Talk about hitting the nail on the head! And to top off the MarketWatch article, the great James Grant added this little ditty for us. “the interventions are like lies – you do one and you need another one. You can't just lie once. You can't intervene once. You must keep intervening to negate or counteract or mollify the effect earlier interventions.” 

I greatly admire James Grant, and read his letter monthly, but rarely am I able to use the stuff he says, because you can't use his letter to quote him, so seeing this in my daily MarketWatch email, was grand!  And talk about things that could really give Gold a boost! Rising inflation!

It's not just zero interest rates remaining for some time here in the U.S. that's damaging the dollar folks, and giving room to grow for the currencies and metals like Gold.  Besides the FOMC yesterday, the U.S. Data Cupboard had an additional data print for our viewing pleasure. The U.S. 1st QTR Current Account Deficit report. The U.S. Current Account Deficit, a measure of transactions between the U.S. and the rest of the world in goods, service, primary income, and secondary income, widened in the 1st QTR by $23.9 Billion, from the 4th QTR, to $111.2 Billion. That's a deficit folks. That means our Trade Deficit, and then the Foreign Direct investments, were a deficit in the 1st QTR. That's equal to 2.6% of GDP, which is no longer in the danger zone, as it had been before the financial meltdown. 

Just because our Current Account Deficit is no longer in the danger zone when compared to GDP, And I have to question this calc due to the fact that the 1st QTR GDP was -.1%…   Somehow the numbers don't seem to work for me, but then that's nothing new! But, as I was saying, just because the Current Account is no longer in the danger zone, it doesn't mean the dollar is out of the woods!

For What It's Worth. Well. Will we as a country ever get past the scandals? The answer is of course a BIG FAT NOI And this latest probe into the lawmakers is probably going to dig up a lot of dirt, folks. I'll keep my ear to the ground on this one, you can be sure of that!  This is a story that was in the Wall Street Journal today.

“Prosecutors are gathering evidence for a grand-jury probe into whether congressional staff helped tip Wall Street traders to a change in health-care policy, an indication the long-running investigation has entered a more serious phase.

Public documents show federal law-enforcement officials and the Securities and Exchange Commission are seeking records and other evidence from the House Ways and Means Committee and a top congressional health-care aide, Brian Sutter, staff director of the committee's health-care subpanel.

The SEC sent subpoenas to the House committee and Mr. Sutter seeking documents and testimony in the matter, according to documents made public by Rep. David Camp (R., Mich.), who is the committee chairman, and Mr. Sutter.

Separately, the Justice Department issued a subpoena to Mr. Sutter to compel him to testify before a federal grand jury at the U.S. District Court for the Southern District of New York, according to Mr. Sutter's public disclosure, which was included in the congressional record per House rules. Committee officials wouldn't say whether Mr. Sutter has testified. A spokesman for the Ways and Means Committee, speaking for Mr. Sutter, declined to comment.” – WSJ

Chuck again. These subpoenas are related to criminal and civil investigations examining whether anyone in the government illegally passed along nonpublic information about the health policy that ended up in the hands of traders.  If they don't find something, I'll be surprised, won't you?

To recap. The FOMC was either a real Doozy or Snoozy, that depends on how you viewed Janet Yellen's talk at the press conference following the news that bond buying was tapered again by $10 Billion. Chuck thinks it was a Doozy for the currencies and metals. the U.S. Current Account Deficit widened in the 1st QTR, will we ever get out from under this boulder?  The currencies and metals are all rallying except Norwegian krone that got whacked for a change in the Norges Bank's wording, and kiwi, which is just flat and out of steam right now.

Currencies today 6/19/14. American Style: A$ .9415, kiwi .8730, C$ .9235, euro 1.3625, sterling 1.7025, Swiss $1.1200,  .. European Style: rand 10.6545, krone 6.0910, SEK 6.6635, forint 223.70, zloty 3.0305, koruna 20.1235, RUB 34.24, yen 101.85, sing 1.2485, HKD 7.7510, INR 60.08, China 6.1531, pesos 12.98, BRL 2.2265, Dollar Index 80.23, Oil $106.28, 10-year 2.58%, Silver $19.95, Platinum $1,454.25, Palladium $827.10, and Gold. $1,281.84

That's it for today. A tough row to hoe for me this morning, but Looky there! I made it! Darling daughter, Dawn, and kids, Delaney Grace and Everett, were at the house when I got home yesterday. They are all so darn cute! Alex heads to Michigan today with the Junior Olympics Water Polo team from St. Louis for a qualifier. He's still not able to play, but is going to support his teammates. Besides, he's almost 19, and getting a chance to go on a road trip, what 19 year old boy wouldn't sign up for that? I was still traveling around the country playing my guitar at that age. So I understand. Cards fail to sweep the Mets, but take 2 of 3, so that's not so bad. The weather here went from cool and wet to the frying pan, but I'm not complaining! And we need to take a minute to give our thoughts to the folks in Nebraska, who have been hit by some devastating tornadoes this week. Well. I guess I'm ready for some Tub Thumping now, so let's go out and make this a Tub Thumpin' Thursday!

Chuck Butler
President
EverBank World Markets