Strong Chinese Data Gives Currencies A Boost!

Chuck Butler’s: A Pfennig For Your Thoughts

July 17, 2017

* Another day of weak U.S. data!

* Gold gains $11.10!

* Jamie Dimon tells us his thoughts!

Good Day… And a Marvelous Monday to you! Another grand weekend here in the St. Louis area, but hot, hot, hot! But that’s OK, as long as the skies are blue, and the sun shines too! I was lucky enough to get to spend some time with two of my best pals yesterday, as Duane and Rick dropped by to say hi. Those are always good times when friends just stop by to say hi! Charlie Daniels Band greets me this morning with their song: The South’s Going To Do It Again… 

Well… We have a some things to discuss this morning, but the BIG THING I want to get out there, Front & Center this morning, is that next week starts my summer vacation, and while I don’t expect any entries for the Pfennig while I’m gone for 2 weeks,  there might be a re-run of a recent Pfennig for your reading enjoyment… I’ll remind you again on Friday, but you’ll have to do without me for two weeks. I can’t imagine how in the world you’ll get by! HA! 

The other BIG NEWS this morning is that China reported some very good data this past weekend, and that has given the currencies an extra boost to start the week. China’s 2nd QTR GDP printed 6.9%, better than expected at 6.8%… Industrial Production for June beat the estimates with a 7.6% growth print VS last year. Expectations for IP were for 6.5% growth. And to round out the data prints from China, their June Retail Sales grew 11% VS a year ago. The 11% print beat the estimates, which were 10.6%… 

There was strong domestic demand, and with the first QTR’s GDP print also at 6.9%, it does appear that even with all the bad stuff going on in the Chinese economy, that it will have enough momentum to beat their annual estimate for 2017, which is 6.5%…  The Chinese renminbi, in case you haven’t been following it in the currency roundup, has been allowed to appreciate quite often in recent weeks, and with these data prints, the renminbi moved stronger VS the dollar again. 

Well, last Friday was a “data day” here in the U.S. and I told you last week before the data prints began coming in, that I didn’t expect the dollar to get any buying from those reports, as they’ll be weak, negative, or just plain miss the expectation. And… it didn’t! In fact, the data prints were so weak last week, that by Friday afternoon, when the color of CPI (consumer inflation) and Retail Sales were known, the Dollar Index was trading at a level last seen last Rocktober… One data print after another shows the rot on the economy’s vine, and yet the Fed Heads continue to say we’re going to see stronger growth in the second half, along with inflation… Ahem, let me clear my voice here… Yes, you’re on the air with Chuck, what’s on your mind? Thank you for taking my call, I’m a longtime listener, first time caller… I wanted to point out Janet Yellen did mention that inflation was slowing the other day, just wanted you to recall that… thank you I’ll hang up and listen to your response on the radio.. Ahem… Thank you for your call and comment… Yes, she did express concern that inflation isn’t growing and she claims that the Fed Heads can’t figure it out… You mean to tell me that with the thousands of economists they have at the Eccles Building and in each of the district home offices, that they can’t figure this one out? I can… and I’m just a country bumpkin, but I did learn a lot of my economics from the great Hyman Minsky!

So, here it is… I didn’t want to front run an interview print that will be coming soon with good friend, Dennis Miller, the Retirementor, But,,, what in the world do you expect inflation to do, when you’re hiking rates? Don’t you hike rates to cool down an economy and tamp inflation? Why, yes Chuck, that’s what you do! Seems like a layup to me… If you hike rates, inflation comes down… So, don’t go hiking rates when you’re  looking for inflation to get stronger! I shake my head in disbelief that I’m the only one in this conversation with the Fed that can figure that one out!

Oh, and by the way, CPI was flat as a Pancake (Head East), and therefore the year-on-year inflation growth is just 1.6%…

And the Butler Household Index (BHI) was bang on again, as Retail Sales disappointed with a negative -0.2% print…

And Industrial production was both fair and bad at the same time… The June prince was up 0.4% which was fair, but it was all driven by more Oil drilling… And the bad was the manufacturing component of the index, which was down again in June, and marks several months now where this component is down…

In fact, my friend, and publishing guru, Bill Bonner, had this to say about employment gains here in the U.S. “What interests us are the influences that have reduced the labor participation rate for working-age men from 76% in 1990 to only 69% today.

That represents about 6 million men who would otherwise be contributing to growth and output. Instead of adding valuable goods and services, they are consuming them.

Altogether, there are said to be about 102 million working-age people without jobs. Since there are only about 200 million working-age people, that means that more than 1 out of 2 is unemployed.
What’s worse, more and more of those who do have jobs work in “low-productivity” fields – such as government, leisure, education, and health.” – Bill Bonner from Bill Bonner’s Diary 7/14/17

OK… that was a long winded run through the gauntlet of U.S. economic data, eh?  let’s move on to something else. Like I mentioned above, the currencies are getting an extra boost from the Chinese data this morning, after the US. data prints on Friday started the currencies on their way to the rally tracks. The Big dog, euro, has been the leader of these gains VS the dollar for the currencies, but the Global Growth currencies like the Aussie dollar (A$), which I’ve always maintained was the Proxy for Global Growth, are really pushing the currency appreciation envelope across the table this morning. 

All the currencies have their own story as to why they are rallying… The Singapore dollar (S$) is rallying because it keeps pace with the Chinese renminbi. The Norwegian krone is rallying because not only did the price of Oil retain its $46 handle through the weekend, but the euro is rallying, and that is a sign for the krone to push the rally further.  The Canadian dollar / loonie has really gotten a lot of movement from the rate hike last week, and then the fact that the price of Oil retained its $46 handle. 

“It” all appears to be coming together, folks…  What’s “It”? I’m talking about the end of the strong dollar trend, that I’ve been talking about for a couple of months now, as sentiment changes from the love of dollars to the love of the euro…  Well, this will be a BIG week for the euro, and give us some real understanding of whether or not this overall currency rally is on terra firma or not… 

The European Central Bank (ECB) meets this week on Thursday, and the markets are all thinking that ECB President, Mario Draghi, will start the conversation about how and when some accommodation will be removed… IF that actually happens, we could see the euro really start to move higher… Remember, the technical chartists’ said that 1.1428 was the level the euro needed to trade past, and once there, its next stop would be 1.17…  

About a month ago, I wrote for the Dow Theory Letters (DTL) ( about this change of sentiment in favor of the euro, and said then that I thought we were seeing signs that the strong dollar trend was over, as the dollar can’t get love when it prints a good data report (not that often) , and gets the snot knocked out of it when it prints a weak data report. For those of who were around at the beginning of the last weak dollar trend, (Feb. 2002) will recall how everyday was a new record level for the euro VS the dollar… This time we won’t see any new record levels, but, we’ll revisit some old ones that sure looked good back “in the day”… 

On Friday, Gold was allowed to gain $11.10 to close at $1,228.40, and is up a couple of bucks in the early morning trading today. I just finished off my most recent piece for the DTL and it was on Gold… I have a very important point to make in that letter about Gold and the “boys in the band”… I realize that a DTL subscription costs money, which is pretty tight these days, so once it has printed and been out there for readers for a period of time, I can talk about it here… So, you have that to look forward to! HA!

Have I told you lately, that I love you… No wait! Have I told you lately that… I truly enjoy the writings of Grant Williams and his Things That Go Hmmmm, letter that arrives in my email box every other Sunday? This past Sunday had a quote in it that I thought just supported what I’ve been telling you for some time now … That the U.S. Consumer has tapped out! This was taken from iNet and is investment analyst, Jim Chanos speaking on this very thing…

“(iNet Economics): We’re seeing weak consumer spending numbers in both auto and housing, which are big drivers of the economy. With unemployment so low and the expansion where it is, these figures should be better than they are. There are portents of even worse things when you look at state and federal tax receipts, which are down, and other leading indicators.

It could all just be a soft spot in an ongoing expansion — time will tell. But the narrative we were told is that animal spirits would take us to the next level of economic activity. That clearly is not happening in mid-2017. We’re 8 years into an economic expansion, and economists say that the modern U.S. economy has never gone more than 10 years without a recession. So as recoveries go we are well into it.
People have bought their cars and remodeled their houses and done a lot of things that one does in an economic recovery. I think incremental spending [spending based on increased disposable income] is going to be harder and harder to come by as time goes on.” – Jim Chanos

And all I have to say about that is… Right arm, farm out, and out of state! HA! I guess that should be: right on, far out, and out of sight! Just some old hippie sayings from the early 70’s… 

To recap… Friday’s data day in the U.S. was a disaster, and the dollar got put on the selling blocks right away, and stayed there in the overnight markets, but then saw more sliding after China printed 3 strong, better than expected, data reports this morning, 2nd QTR GDP, Industrial Production and Retail Sales. The currencies are all on the rally tracks this morning, led by the BIG DOG, euro… And Gold gained $11 on Friday!

For What It’s Worth… I received this in my email box over the weekend, and immediately thought this is good stuff for the FWIW…It’s a tirade by JP Morgan’s Jamie Dimon, and can be found on MarketWatch here:

Or, here’s your snippet: ” Tell us what you really think, Jamie Dimon.

J.P. Morgan Chase & Co.’s outspoken CEO on Friday broke into an impassioned, expletive-tinged rant on the state of Washington politics and its impact on the U.S. economy during one call to discuss second-quarter results.

Dimon said U.S. growth was held in check by a lack of policy momentum in D.C. that has failed to deliver a spate of pro-growth legislation that could help to boost an otherwise sluggish economy. “We have to focus on policy that is good for all Americans,” Dimon said, speaking Friday morning on a call with reporters to discuss earnings.”

Chuck again… Well he goes on and on about this stuff in the article, so if you want to read his tirade in full, click on the lick above… 

Currencies today 7/17/17… American Style: A$ .7824, kiwi .7332, C$ .79, euro 1.1463, sterling 1.3060, Swiss $.9629, … European Style: rand 12.97, krone 8.1719, SEK 8.3311, HUF 266.94, zloty 3.6764, koruna 22.7669, RUB 59.03, yen 112.45, sing 1.3683, HKD 7.8032, INR 64.30, China 6.7708, peso 17.54, BRL 3.1782, Dollar Index 95.21, Oil $46.67, 10-year 2.31%, Silver $16.01, Platinum $926.10, Palladium $857.98, and Gold.. $1,229.60

That’s it for today… I told you I had a lot to discuss with you, and I kept my word, eh? Cardinals are licking their wounds after losing 2 of 3 to the Pirates to start the second half of the season, and now head to the Big Apple.. I received my new letter from Grant Williams last night, and am looking forward to reading it when I get a chance today. While I’m on vacation, little d, Delaney Grace will turn 10.. Can you believe that? She was born right after I had my first two major cancer surgeries, and so I’ll always know how old she is going to be! There used to be this cute little couple that were Pfennig Readers, and every time they saw me at a show, they would ask to see a recent picture of Delaney… Marvin Gaye and Tammy Terrel take us to the finish line today with their song: Ain’t Nothing Like The Real Thing… And with that, it’s time… I hope you have a Marvelous Monday, and Be Good To Yourself!

Chuck Butler