From A Trade War To A Currency War?

June 25, 2019

* Currencies see profit taking in the overnight markets

* Russian ruble proudly displays its highest interest rate…. 

Good Day… And a Tom Terrific Tuesday to you! A night off for my beloved Cardinals last night. I will say something though about all the adoration the St. Louis fans showered on Albert Pujols this past weekend…. IF I was a Current Cardinal ballplayer, I would have viewed that, as…. “if I can perform for 11 years like he did, and bring 2 world championships to the city, I will get ovations like that when I return too”… So, maybe it lit some fires under the underachieving Cardinals… We shall see…. I watched some of the college World Series last night, I still can’t believe they still use metal bats… No wonder pitchers are the most highly drafted players, because you can’t tell if a guy has power or is it his metal bat? OK… Pink Floyd greets me this morning with their 17 minutes song: Shine You Crazy Diamond…

The dollar selling continued through Monday’s trading and into last night, as the euro traded past 1.14… We were here a couple of months ago, when traders were still trying to figure out if the dollar was ready for a multi year weak trend or not… Apparently, at that time it wasn’t, and now the questions come forward and want to know it the dollar’s ready now? I’ll let you know, if the euro continues to climb to 1.15…

And just to throw some spice in our soup… The euro saw some profit taking last night, nothing that would alter your taste buds, but just extra flavoring… The Profit taking brought the euro back below 1.14 this morning, but not a big deal as far as I’m concerned… Watch for today’s reaction to the profit taking… If the euro rebounds and brushes the profit taking off its shoulder, like a dandruff flake, then it’s all good… But should this profit taking trigger some additional selling, then all bets are off… So, watch the trading today… 

For those of you new to class…. The euro was introduced in 1999 at a price of 1.17, but quickly fell in value and throughout the year it traded in the low 90-cent range… By 2002, and traders were getting the idea that it was here to stay, they began offsetting it to the dollar, and the euro had climbed back to parity with the dollar… And then the weak dollar trend began in Feb. of 2002, and the first stop for the euro was 1.10, then 1.20, 1.30, 140, and eventually made it as high as 1.50…

I talked about Jeffrey Gundlach a couple of weeks ago, he’s now the new Bond King… And he was quoted yesterday as saying that the dollar bear market has begun… So… I’m not so sure as of that yet, and like I said if we see the euro trade past 1.15 then I’ll be the first to tell you that the multi-year weak dollar trend is now in place…

There was one other thing I forgot to mention yesterday when spelling out the things that pushed the dollar over the edge last week, and that is… The U.S. President, Trump, has decided to go from Trade War, to Currency War folks… Recall I was complaining about him chastising the Eurozone for keeping the euro cheap for exports, but at the same time was calling out the Fed Chairman and blaming him for the strong dollar…. Well, it’s gone on and on now all weekend, and Trump is not taking any prisoners here… he wants other currencies to be stronger than the dollar… Will he get his wish? Well, it sure looks like it…

And Gold? Well, I was reading an email from the GATA folks last night from Dave Kranzler, of whom I’ve quoted before… And he was saying something that I’m very fearful of… And that is the price manipulators getting together to pool up their short Gold trades and well, whack Gold once again… But, he pointed out that since Gold started this run last week, there’s been no success in brining the price back down yet, and that maybe, with all the foreign Central Bank, and investors buying of physical Gold, that their efforts to get the price of Gold down, may be diminished… But while that may be true… I think we should be prepared for some volatility going forward, which would mean to buy the dips in price, in my humble opinion!

And that talk about all the physical buying got me thinking about what I used to tell you dear readers all the time, and that was if we wanted to snuff out the short Gold trades, there needed to be enough demand of physical Gold so that the price manipulators couldn’t make a difference… So, it was nice to see someone besides me have that idea….

And add to those thought the fact that Gold is up another $8 in the early morning trading today!  Got Gold? 

The Russian ruble continues to move stronger VS the dollar, taking out the 63 handle finally, yesterday…  The ruble is now 62.83, which is a far cry from the rot on the vine that was a price of 70 from a year and a half ago, and it’s also a far cry from the 35 it traded before the conflict with Ukraine that began in 2014… So, it’s been a long slog for the ruble, but now it’s got an ace up its Bullwinkle sleeve…  Higher interest rates than any country in the Industrialized world, and with investors starving for yield…  Well, I think you can see where I’m going here… 

In the U.K. the frontrunner to replace former PM May, and become the Imperial Leader (HA!) of the U.K., Boris Johnson, was quoted yesterday as saying that there could be no BREXIT deal…  That hit the pound sterling traders in the gut… I have to think that he’ll backtrack and come up with some explanation of his comment, so that the pound can get back on the rally tracks. 

The U.S. Data Cupboard has the Case / Shiller Home Price Index for April this morning. I would look for more declines in the price index…  We’ll also see the color of the stupid Consumer Confidence for this month. Last month we actually saw a slide in this index number from 134 to 130, so will it continue to slide? I doubt it, because they don’t ask you and me!

To recap…  The currencies continued to move stronger VS the dollar all day yesterday, but there was some profit taking in the overnight markets, so the question for today, will be whether or not the euro shrugs the profit taking off or not…  Jeffrey Gundlach thinks it will and has called these recent moves the beginning of the bear market for the dollar!  Gold continues to move higher, without any roadblocks being thrown down by the price manipulators…  Has all the physical demand for Gold knocked the price manipulators for a loop? 

For What It’s Worth…. Well, I’ve heard some really strange ideas these past couple of months, I won’t mention them for they’re not even worth my time to mention them… But I did come across something that is just about the stupidest idea I’ve heard… It’s a call to have taxpayers pay for Medicare for everyone, even for illegals and it can be found here:

Or, here’s your snippet: “Vermont Senator and Democratic presidential candidate Bernie Sanders admitted Friday that his Medicare for All plan would cover the nearly 11 million illegal immigrants present in the United States.

Sanders has routinely campaigned on his plan to nationalize the U.S. health care system and provide so-called “free” health insurance to every individual. The plan is estimated to cost more than $32 trillion over the next decade.

“We’re gonna … create a Medicare for All health care system which guarantees health care to every man, woman, and child,” Sanders said during the National Association of Latino Elected and Appointed Officials’ (NALEO) presidential candidate forum Friday. “We will organize the American people around the idea that all people in this country have the right to health care.”

Chuck again… That’s $32 Trillion over the next decade folks… OK, now I change my tune from our annual deficits reaching $2 Trillion to them reaching $4 Trillion! And you and I know who’s going to pay for that right? And that’s all I have to say about that!

Currencies today 6/25/19 American Style: A$.6970, kiwi .6645, C$ .7589, euro 1.1382, sterling 1.2727, Swiss $.9769, European Style: rand 14.2931, krone 8.5052, SEK 9.2428, forint 284.60, zloty 3.7380, koruna 22.4505, RUB 62.83, yen 107.05, sing 1.3534, HKD 7.8063, INR 69.39, China 6.8752, peso 19.23, BRL 3.8217, Dollar Index 96.02, Oil $57.67, 10-year 2.01%, Silver $15.43, Platinum $814.22, Palladium $1,515.30, and Gold… $1,428.51

That’s it for today…  I woke up this morning and thought it was later in the week, and that I had to hurry to get to my Thursday morning appt. And then it hit me that it was only our Tom Terrific Tuesday!  Well, one week down, by myself, and one week to go! I think I’ll be just fine…  I say that just to get to my former colleagues, Jen and Christine, who don’t believe that a man can survive when his wife is away…  Of course we’re all getting older now, and for some it’s not a choice, unfortunately…  OK, I plan to talk about the Hong Kong dollar tomorrow, so be sure to come back for that…  The band Focus takes us to the finish line today with their great 70’s instrumental hit song: Hocus Pocus…  don’t remember that one? YouTube it, I think it will come back to you quickly!  I hope you have a Tom Terrific Tuesday and Please Be Good To Yourself!

Chuck Butler