Dollar Bugs Positioning For A Jackson Hole Rebound!

Chuck Butler’s: A Pfennig For Your Thoughts 

August 23, 2017 

* Eurozone Composite PMI rises!

* Oil and Petrol Currencies can’t find a bid! 

* We need to get out of the mud! 


Good Day… And a Wonderful Wednesday to you! Well, the “day after” had everyone sharing their personal experiences with the Great American Solar Eclipse, they were all good stories! My beloved Cardinals got whacked by the Padres… Yes, I said the Padres… Yesterday’s trading was a real dud, and Elton John greets me this morning with his song: Mona Lisas and Mat Hatters… A good early morning song, for sure! 

Watching paint dry would be for interesting than the action in the currencies yesterday, as the Dog Days of Summer really had a grip on traders… In the overnight markets the euro was taking on some water,  which was easily bailed out when their latest PMI report printed and showed that manufacturing in the Eurozone is expanding faster than expected, and it’s not just Germany pulling the weight on this, folks… France showed a nice expansion too, as did the Club Med countries. 

For those of you who are keeping score at home the Eurozone PMI Index grew to 55.8 in August, which I’ll remind you any number over 50 represents expansion… The previous month’s index number was 55.7, so the recovery of the Eurozone economy continues, and this should go a long way to convince the European Central Bank president Mario Draghi that the economic stimulus of bond buying a negative deposit rates needs to begin to be unwound. 

So, the euro is a bit stronger this morning because of a fundamental economic report, but the rest of the currencies haven’t shaken the mud that they’ve been stuck in, off, yet…  So, a Jackson Hole Rebound (JHR) is what dollar bugs are positioning themselves for…  And that’s why if there’s been any movement in the currencies so far this week, it’s been about the dollar.  

So, what’s this JHR all about? Well, recall on Monday this week, I talked about the Fed’s Jackson Hole Wyoming Boondoggle that takes place this time of year every year, and how both Janet Yellen and Mario Draghi would be there, and my hopes were for Janet Yellen to not keep to the company line about how the U.S. economy is doing great, blah, blah, blah, but that Draghi would announce plans to unwind the Eurozone’s monetary stimulus.  

Well, apparently my wishes for Yellen, aren’t held by everyone… Hmmm, imagine that! Chuck’s thoughts being different than everyone else’s… I never would have thought that to take place, but there it is… amazing, don’t you think? HA!   OK, back to being serious…  Yes, apparently the dollar bugs believe that Yellen will also dive into the unwinding of the Fed’s Balance Sheet, and if that happens the dollar could very well rebound for a day or two. 

But all that doesn’t get started until tomorrow, but the positioning for a JHR is taking place now… UGH!  I prefer, much more that these markets react to what’s happening at the time, so there is no need to unwind positions and see the currencies whip around… But, it is what it is, and we are left to deal with everything. 

Above, I mentioned that the currencies, for the most part, are still stuck in the mud, and left that open for me to talk about the stealth moves of the Norwegian krone and Swedish krona…  I’ve been mentioning the krone and how it’s receiving love from the Oil rebound, and the euro rebound, but usually stop there and leave out the krona…  But the krona’s rally has been nearly as impressive as the krone’s rally, and today and tomorrow the krona could step up its moves if the economic data prints as I expect it to.  

For those of you who missed class on Monday or just a refresher on the data that will print in Norway and Sweden today and tomorrow, here you go… Norway will see a labor report and 2nd QTR GDP, and Sweden will see a labor report… I would love to see these two currencies react accordingly to the data prints, for that would mean fundamentals were present, if not for just a day…  

Pound sterling has seen itself in a gauntlet formed by the BREXIT talks… Apparently, the latest development that sent the pound to the woodshed, is the report that European Union laws will still affect the U.K. even after BREXIT…  Right now, I don’t think I would touch the pound with your ten foot pole… There are just too many unanswered questions surrounding the BREXIT talks and how they will weigh on the pound…  So, move along here, for these are not the droids you’re looking for! 

The price of Oil appears to be stuck in the same mud as the currencies, and therefore the Russian ruble and Brazilian real, along with the Canadian loonie, also remain in the mud. I have to think that sooner or later, love is gonna getcha, no wait!  I have to think that sooner or later, we’ll see the mud dry and the currencies and commodities will be able to break out of the mud’s grip…   

Next week, for example, we’ll return to a week of economic data here in the U.S. and that will provide the drive for the currencies to react.  And next Friday Sept. 1, will be a Jobs Jamboree, and we all know what kind of emphasis that report has on the dollar. I sit here and chuckle at that thought, because I have to wonder how many traders will actually be around on that Friday, since next weekend will be Labor Day…  

Speaking of Labor Day… it’s the last party weekend of summer, and when I was a kid, it meant the return to school, but these days they go back way before that! I have a big BBQ on Labor Day every year, and as we grow older, friends end up spending time away from home on Labor Day, and our crowds dwindle each year, but those that come are treated to what the Big Green Egg produces and a lot of comradery and games…  So, until it’s just me and Kathy attending the BBQ, I’ll keep cooking!  

Alrighty then, let’s get back to the markets!  Gold didn’t find a bid or offer to move it yesterday, and in the early morning trading today, it’s up a whopping $1.90!   One might be content with the move that Gold has booked so far this year…. But not me!  I still believe that Gold is cooking up something, and is gearing up for a strong run…  of course that’s my opinion and I could be wrong…  

  You know I say that a lot in this letter, that “it’s my opinion and I could be wrong”…  But in reality, isn’t the whole letter my opinion?  Oh well, it’s far better to put things out there front and center than to hide them in the fine print! 

The U.S. Data Cupboard has a couple of prints today, 2nd Tier that is… First up is the Markit PMI for August, and then the New Home Sales for July will print. I’m sure traders  will take a look at these two prints, shrug them off and move on to their appointment to get their boats primed and ready to go for this weekend!  

To recap…. Another day of doldrums as the Dog Days of Summer really have a grip on the markets right now. The euro was losing some ground overnight, but then a strong Composite PMI for August turned thing around for the single unit and it is up a bit on the day.  It appears that traders are positioning themselves for a Jackson Hole Rebound for the dollar…  

For What It’s Worth…  Well, I talk so much about debt, and consumer debt, that when I saw this report on MarketWatch I thought it would be good as an add-on to those talks about consumer debt…  So, it can be found here:  

Or, here’s your snippet:”People with bad credit who try to improve their score by signing up for “subprime” credit cards could be doing themselves more harm than good.

Personal-finance company NerdWallet analyzed 10 popular “subprime specialist issuer” cards (SSIs), which are marketed to people who have low credit scores and may have difficulty getting a regular credit card. On average, they cost consumers more than $150 a year in annual fees, application fees and maintenance fees, NerdWallet found.

“A lot of people don’t understand how subprime cards work,” said Kimberly Palmer, a credit card expert at NerdWallet. “When you dig into the details, they can actually really hurt you.” If every subprime consumer had one subprime specialist issuer card, and they all paid $150 a year in fees, they would be paying some $2.5 billion a year.

Consumers with low credit scores often find it difficult to get out of that credit category because they have few options for credit products to use, and the ones they can be approved for, including subprime credit cards, often have undesirable terms. In contrast, there are many credit cards available to people with higher scores that have no annual fee, application fee or maintenance fees. ” 

Chuck again…  This is the kind of stuff that people with credit problems need to hear, not tricks of the trade, or get rich quick schemes… 

Currencies today 8/23/17… American Style: A$ .7897, kiwi .7223, C$ .7812, euro 1.1785, sterling 1.2802, Swiss $.9691, … European Style: rand 13.2379, krone 7.8939, SEK 8.0969, HUF 257.40, zloty 3.6345, koruna 22.1604, RUB 59.02, yen 109.36, sing 1.3627, HKD 7.8258, INR 64.07, China 6.6598, peso 17.77, BRL 3.1602, Dollar Index 93.41, Oil $47.73, 10year 2.22%, Silver $17.14, Platinum $980.39, Palladium $936.46, and Gold… $1,292.90 

That’s it for today… I sat outside last night to watch the Cardinals/ Padres game, it was a nice cool evening, strange for August, but about 9pm I bagged it and came inside!  Well, as soon as I hit send on this today, I have to begin to get ready for my scans this morning.  it’ll be a busy morning for me, with scans, and then a visit with the heart doctor, and then a visit with the cardiac device people… By the time I’m finished with all that, I’ll be starving!  Alice in Chains takes us to the finish line today with their song: No Excuses…  And that reminds me of a saying that the old football coach used to say over and over… “Excuses never won a ballgame for anyone”…  And with that, I’ll send you on your way to having a Wonderful Wednesday… Be Good To Yourself!