Is The ECB Behind The Euro Selling?

July 23, 2018 

* Currencies and metals rally on Friday!

* Trump doesn’t appreciate the rate hikes!

Good Day… And a Marvelous Monday to you! A very nice weather-wise weekend here in the St. Louis area, led to a lot of outside time for me! Warm but not excessive heat, I loved it! My beloved Cardinals didn’t have the weekend series with the rival Cubs turn our the way they wanted… But boy did Matt Carpenter have “a day” on Friday… I texted my baseball buddies yesterday to say, that I have officially given up on Marcel Ozuna, not that most of you care, but that’s pretty bad when I give up on a player… I sure hope he proves me wrong! Yes, greets me this morning with their classic rock song: Roudabout…

Well, Friday’s price action in the currencies saw the dollar’s worst day in over two weeks… Seems the dollar bugs got spooked when President Trump not only blasted the Fed and their rate hikes one day, but came back for more for day two! Seems that Trump doesn’t appreciate the Fed hiking rates after all he’s done to improve the economy (tax cuts)… I don’t see this having any affect on Jerome Powell, and his band of Fed Heads from proceeding with their rate hikes, but I guess one always has to have in the back of their mind, that the President isn’t happy with them!

So, the euro, which on Thursday morning was hovering around the 1.16 handle, going back an forth around the handle. But by Friday’s end of the day/ week, the euro was 1.1745… I’ve told you all this before, but for any new readers here goes… The euro is the offset currency to the dollar, so when the dollar gets sold, the euro rallies, and vice versa… The recent trading has seen the dollar on the rally tracks just about every day, so the rain on the euro’s parade was quite heavy at times.

And Gold was allowed to rally closing on Friday up $9.20 on the day VS Thursday’s close. Boy was I ever mesmerized by Grant Williams’ Things That Make You Go Hmmmm…. Last night… He printed his speech from the recent Vancouver Conference, and in it he points out something I used to tell people all the time… In fact, a few years ago in hills outside of Atlanta, Georgia, where the EverBank managers were having a retreat, I told the people there that if Richard Nixon hadn’t removed the dollar from the Gold standard, that they wouldn’t be making so much money these days… I also told them that we wouldn’t be looking at a $15 Trillion debt, and unfunded liabilities of nearly $100 Trillion (remember this was a few years ago)… We, as a country had been growing by leaps and bounds, until the debt reached a limit where it took too much effort and attention to service the debt, and that’s when the economy began its Japan-like decade of relatively no growth…

Grant Williams pointed out that we are a need of a new Gold Standard… Again, about 6 years ago, a reader sent me a note and asked me why the U.S Gov’t didn’t just sell its Gold to pay off the debt? I then put pencil to paper, and did some math… and responded that selling the Gold at the price at that time wouldn’t put a dent in the National Debt… However, if the Gov’t wanted to reset the price of Gold, to say $10,000 per ounce, then they would have something! A reset of the Gold price wouldn’t be the first time this was done… Remember FDR confiscated everyone’s Gold and then reset the price of Gold up 75%!!!!! And then made it illegal to own Gold or trade it… We all know that’s been changed over time, but the reset is the most important thing…

Things That Go Hmmm… is a paid for subscriber newsletter, and it’s well worth the cost of admission, so just Google it or Grant Williams and you’ll find it… I rely on his newsletter to set me straight from time to time!

OK… Well, did you see/ hear about the tweet that President Trump sent out last night directed to the Iranian President? WOW! Very Strong words, but now that he’s gone to DEFCON 4 with this message, what happens if Iran ignores it and continues to threaten America?  There’s no backing down now… In case you missed it here’s the tweet: “To Iranian President Rouhani: NEVER, EVER THREATEN THE UNITED STATES AGAIN OR YOU WILL SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE. WE ARE NO LONGER A COUNTRY THAT WILL STAND FOR YOUR DEMENTED WORDS OF VIOLENCE & DEATH. BE CAUTIOUS!”  

Now, I’m not about talking about the President’s Tweets, but I thought for sure that this tweet would be a market mover for Gold… But a quick look at the shiny metal this morning, shows that’s just not the case, as Gold is flat as a pancake (Head East)…  

I told you last week, that what I needed was some time with my long time friend, and former boss, Frank Trotter, to help me with understanding what the heck is going on in the markets… What should be down is up, and what should be up is down…  He read that in the Pfennig, and fired off a note to me telling me this: “Things here in the US are simply madness to me. Pick a topic and rational analysis and decorum seems to no longer apply. The residents are running the insane asylum and people seem okay with that.” 

I have a call scheduled with Frank today, so hopefully he’ll be able to perform those old Jedi mind tricks on me, and I’ll hang up feeling much better about the goings on in the currencies and metals! 

The overnight markets have once again been unkind to the euro, and other currencies… Gold was able to hold its Friday gains, but not so much the euro, which gave back 1/4-cent of its gains overnight  last night.  UGH! You don’t think it’s the European Central Bank (ECB) doing the euro selling overnight do you? I mean, they need a weaker currency to help introduce inflation in their country, (they think!)…  So, they have the motive, they have access to the currency markets, so they have the weapon… Uh-oh! 

But they wouldn’t do that would they? Sell their own currency? In this day and age, I have no doubt they would…  But let’s just say that it’s not the ECB, then who?  The Russians and Chinese would much rather see the euro gain VS the dollar, as they have no qualms about telling the world that it needs a dedollarization…  

I sent off my DTL piece for this Thursday yesterday… And I’ll give you a snippet of a topic I discussed in the letter. And that is about the Russian ruble…  Think about this for a moment… What country has a Trade Surplus? What country has seen their inflation drop from near 10% to less than 3%? What country has seen economic growth, despite economic sanctions placed on them? And what country other than China has gone bonkers with Gold accumulation?  And more importantly, what country hasn’t gotten caught up in the currency wars going on right here, right now?  There’s only one answer to these questions and that is Russia, and their currency the ruble is a currency that I tend to believe should be stronger and would be if the euro got on a roll VS the dollar… 

I’m not a cheerleader for Russia, folks.. I’m just pointing out the facts that lead to a potentially strong currency… I can’t find many currencies these days that warrant getting pointed out for having a potentially strong currency!  

The U.S. Data Cupboard doesn’t have much for us in the early part of this week, with only Existing Home Sales and New Home Sales dominating the first two days of data prints this week. It’ll be Thursday when we finally see a piece of real economic data, when Durable Goods and Capital Goods Orders print for June. By the time that data prints on Thursday, I’ll be 35,000 feet in the air, on my way to my summer vacation! 

To recap… The currencies turned around and rallied on Friday, but saw some of those gains of Friday, given back in the overnight markets last night… Chuck points out, using his CSI training, that the ECB looks to be the perp we’re looking for with regards to who is selling the euro in the overnight markets?  Gold did gain $9.20 on Friday, and is flat this morning, so maybe that’s the start of something, eh?   And Chuck points out that Gold should be rallying on the President’s latest tweet, but it’s not… UGH!  

For What It’s Worth…  I thought that since I went on and on about Russia and the ruble this morning, that this article about Russiaphobia fit nicely in the FWIW section today, and it can be found here:

Or, here’s your snippet: “Russian demonization and Russophobia have gripped the U.S., where politicians would rather impeach Trump than avert a nuclear war with Russia, professor emeritus at both Princeton and New York Universities Stephen Cohen believes.

While U.S. media and establishment still cannot settle nerves after Trump-Putin summit in Helsinki, Cohen, who is also contributing editor at The Nation, and Chicago University professor John Mearsheimer, bashed the Russian bogeyman approach in an interview to Vice news.

Cohen has been labelled as Russian president’s apologist, with “tsunami” of attacks on him. However, the scientist says that those people are just uninformed, with Mearsheimer adding many refuse to engage in fair dialogue with both of them merely because they would “lose the debate.”

“We’ve demonized Putin and we’ve putinized Russia, so we’ve demonized Russia. Russophobia is running amok in this country.” Cohen said. “I’ve seen these things from the inside. I’ve re-thought and re-thought how we got to the edge of war with Russia, where we haven’t been since Cuba in 1962. And I have concluded it is 95 percent our own doing.”

Chuck again… It’s all strange to me what’s going on folks…  but I do believe it’s all the discord between the parties, and the parties’ followers… I’m just saying… 

Currencies today 7/23/18… American Style: A$ .7410, kiwi .6810, C$ .7610, euro 1.1712, sterling 1.3240, Swiss $1.0083, European Style: rand 13.49, krone 8.1526, SEK 8.8342, forint 278.32, zloty 3.69, koruna 22.0585, RUB 63.12, yen 111.10, sing 1.3633, HKD 7.8474, INR 68.68, China 6.7685, peso 19.07, BRL 3.77, Dollar Index 94.46, Oil $69.08, 10-year 2.88%, Silver $15.49, Platinum $832.15, Palladium $894.02, and Gold… $1,230.38, and the SGE Gold price $1,232.32

That’s it for today… Up all night again last night… I’ve been sleeping like a baby, up every 3 hours! But I don’t have a tumor in my mouth any longer! I’m happy to trade the tumor for sleepless nights! My St. Louis oncologist, told me that my recent scans said there were two very small nodules on my lung, but that they hadn’t grown, so they’re not sure what they are… I told her, that with my history, we all know what they are…  But they aren’t growing which means the medicine is keeping them in check… I never smoked one cigarette in my life… go figure!  OK, enough of that! I have two more Pfennigs to write (Tuesday and Wednesday) and then you’re on your own for the next two weeks…  My darling granddaughter, Delaney Grace, continues to perform on the Muny stage each night with the closing night coming this Wednesday. And with that, the band, Looking Glass takes us to the finish line today with their song: Brandy…  One hit wonders, eh? I hope you have a Marvelous Monday, and remember to Be Good To Yourself!

Chuck Butler