Surprise, Surprise, Surprise!

Chuck Butler’s: A Pfennig For Your Thoughts 

January 12, 2018

* German coalition Gov’t is close!

* Big Dog euro leads the charge today! 

* Gold soars in the early morning trading!  

Good Day… And a Happy Friday to one and all!  Well, as Gomer Pyle used to say, Surprise, Surprise, Surprise! I know, I know, I told you no Pfennig today, due to infusion Confusion, but, there was no Infusion yesterday, so here I am! The infusion center down here didn’t have enough time to clear everything with the insurance, etc. for the infusions to switch down here, so I’ll be called back next week sometime. Seals & Crofts greet me this morning with their song: Summer Breeze..  

So… Don’t look now, actually I don’t care if you take a sneak peek, but the trapdoor was sprung under the dollar yesterday afternoon, and this can be witnessed in two ways… First, the euro has hit a 4-year high of 1.2120, and second, the Dollar Index has fallen from 92.42 yesterday morning at this time to 91.39 this morning. It’s not often that we see a full figure move in the Dollar Index in a trading session, but yesterday, was that day…

The dollar selling began slowly and quietly yesterday but when it was announced that German was every so close to forming a coalition gov’t, all hell broke loose for the dollar, and it began to fall through the trap door. It will be interesting to see if all that dollar selling yesterday and throughout the night continues once the NYC traders arrive at their desks this morning. 

So, the Big Dog euro is once again off the porch, where it likes to lay around in the shade all day, and it’s chasing the dollar down the street. Longtime Pfennig readers know that when the Big Dog gets off the porch, the rest of the little dogs/ currencies, can begin to chase the dollar down the street too, and often these little dogs outrun the Big Dog. But this morning it’s all about the Big Dog, euro. 

Remember when the German election results revealed that a coalition gov’t would have to be formed, and the euro got the stuffing knocked out of it?  Because… Traders don’t like “unknowns” and that was a HUGE unknown… Well, it only makes sense that now that it appears that there will be a coalition gov’t, the “unknown” is being taken out, and the euro is free to move about the country!  And the euro is trading at a 4-year high…

Back in 2014, though the euro was trading downward, so the 1.2120 figure was on the way down, this time it’s on the way upward! So, when do you figure European Central Bank (ECB) President, Mario Draghi, throws the euro under the bus, as he’s been apt to do every time the Big Dog, euro, gets off the porch. Eurozone economic data has been good and strong latterly, which helps the euro once it gets going like it’s doing now, and I believe that Draghi, is one of those Central Bankers that strong currency hurts economic growth… 

A strong currency does combat rising inflation, and Draghi won’t like the strong euro for that reason, utmost. 

The Norwegian krone is seeing the euro rise and that helps the krone to also rise.  I know I said the other day that it appeared that the krone was stuck in the mud at 8.08, but at that time, traders were trading with an “opposites day” mentality, and the euro couldn’t find a bid…  But not any longer! There’s a strong bid for euros this morning, and the krone is right alongside the single unit. 

And how about that move in Gold this morning?  With the dollar getting sold like funnel cakes at a state fair, Gold began to move higher mid afternoon, after spending the morning in a choppy trading session. Gold initially lost the $8 gain it had in the early morning trading, only to come back and close up $5.60 on the day to $1.321.90…  But this morning in the early trading Gold is up $10 to begin the day at $1,332.60. This is the highest level in Gold since last September, when it appeared then that Gold was heading to $1,400, as many forecasters had said it would by year-end, 2017…  

But, that’ when the “boys in the band” stepped in and engineered a takedown of the Gold price. I’m not saying that the “boys in the band” couldn’t step in again, I’m just saying that Gold’s move is strong, and appears to be without an shackles attached to it this morning. The Jefferson Starship is playing on the IPod right now, and it’s my fave song by them. Miracles, which seems to be what we need for the “boys in the band” to stay away from this move by Gold…   

I was sent a link to an article by longtime reader, Bob, yesterday, that talked about Russian President, Putin, talking glowingly about how the Russian economy is growing. GDP had just printed a 1.9% gain, which I don’t think I need to remind you, but will anyway, is held down by the economic sanctions that the U.S. and European Union has placed on Russia…  Russian consumer inflation printed yesterday and year on year the December inflation only grew 2.5%!  That’s a HUGE improvement for the Russian economy. And once again I point your attention to the Central Bank of Russia Gov. Elvira Nabiullina, as the shepherd of the Russian economy, and what a great job she has done steering it around all the pit holes that the sanctions, and a lower Oil price could have caused. 

Back in the 90’s there were two Central Bankers that I lauded all the time for their work in steering their respective economies to higher ground… Germany’s Hans Tietmeyer, and the Reserve Bank of New Zealand’s Don Brash…  Elvira Nabiullina is the new version of these former stalwart Central Bankers.  

Well, the U.S. Data Cupboard finally gets restocked this morning, and we get to see the color of the December Retail Sales…  I expect nothing more than a good positive number from this data print, as we were in the Christmas and other holidays spending period… If we can’t mustard a positive Retail Sales in December, then we should pack up the bags and go home! 

So, it looks like a good strong Retail Sales print could wrap a tourniquet around the bleeding by the dollar to end the week, which would be fine with me, given that the dollar’s lasting effect would only last one day. Remember, when the markets come back next Tuesday here in the U.S., they will have long forgotten about a good strong December Retail Sales print.  

To recap…  The trapdoor was sprung underneath the dollar yesterday afternoon, after it was announced that Germany was ever so close to forming that coalition gov’t that cost the euro quite a bit of real estate back when the elections took place. So, the Big Dog euro is back to getting off the porch to chase the dollar down the street. Gold had a choppy day of trading yesterday, but is up a solid $10 in the euro morning trading today.

  For What It’s Worth…  In a “sign of the times” this article comes to us courtesy of USA Today, regarding the closing of many Sam’s Clubs, and can be found here:  

Or, here’s your snippet: “Sam’s Club, the membership warehouse owned by retail giant Walmart, is shutting down or converting 63 stores.

The company attributed the decision to the need to better fulfill online orders, less population growth than expected in some markets and too many competing locations.

The Sam’s Club closures were confirmed the same day Walmart said it would lift the hourly minimum wage in the U.S. to $11 and give out bonuses of up to $1,000.

Of the Sam’s Club locations, about 50 will be going out of business for good. Roughly 10 of those locations are closing their doors as of Thursday, while the remainder will be shuttered over the next three to four weeks.

About 10 to 12 of the stores are slated to be closed temporarily as the retailer converts them to regional distributional centers to help fulfill online purchases. Workers previously employed at those sites are not guaranteed one of the new positions.”  

Chuck again…  it’s one thing when the high-end stores close, but when an outlet like Sam’s Club closes doors, it’s quite telling folks…  

Currencies today 1/12/18… American Style: A$ .78807., kiwi .7260, C$ .7992, euro 1.2127, sterling 1.3616, Swiss $1.0305, … European Style: rand 12.3894, krone 7.97, SEK 8.1050, forint 254.29, zloty 3.4374, koruna 21.0352, RUB 56.80, yen 111.03, sing 1.3273, HKD 7.8229, INR 63.55, China 6.5024, peso 19.20, BRL 3.2237, Dollar Index 91.39, Oil $63.46, 10yr 2.55%, Silver $17.15, Platinum $997.04, Palladium $1,089.92, and Gold… $1,332.60    

That’s it for today… Again, I went through this yesterday, but since I’m here writing today… Happy Birthday to my son, Andrew!  This is a 30day Holiday Weekend, so I hope you get to have a day-off on Monday! It was absolutely beautiful here yesterday, I knew the clouds and rain wouldn’t be around too long! Daughter Dawn sent us a short video of granddaughter, Delaney Grace in her latest performance on stage in the local theater production of Mary Poppins… She’s so darn cute! Love her to pieces! Kathy was up early this morning and already brought me a cup of coffee! YAHOO! Now I’ll head out to the deck that overlooks the beach and ocean and watch the sun rise over the ocean with my coffee, and my phone playing some classical music to start the day…  Since it’s a 3-day holiday weekend, there’ll be no Pfennig on Monday. Consider this one a “bonus Pfennig”! Now go out and make this a Fantastico Friday! And it appears that today is a good day to make it a good day!  Be Good To Yourself!   Chuck Butler