Well, Is There A Meeting At G-20, Or Not?

June 11, 2017

* A tourniquet was wrapped around the bleeding currencies yesterday

* What’s up with the rising 10-year Treasury yield? 

Good Day… And a Tom Terrific Tuesday to you! I had a dear reader send me a note last week that was dripping with sarcasm… he said, “I just heard that Tom Brady is calling himself “Tom Terrific”, you might be in trouble with his people if you keep using it”! HAHAHAHA! Where does Tom Brady get off stealing Tom Terrific! He was a cartoon character of my youth, one that I hold near and dear to my memories! I really am upset by this news… And they’ll have to come knock down my door to stop me from using it! I’m just saying! HA! Steely Dan greets me this morning with their song: Don’t Take Me Alive… From the Royal Scam Album…

OK… the currencies were largely unmoved on Monday… The dollar might have fought back in the overnight markets, but it did little during the U.S. trading session, due to the news that “Unless China’s Xi meets with Trump at the G-20, at the end of the month, Trump will impose more tariffs on the Chinese”… That was a slam the brakes on moment for the dollar bugs… Gold gained back a couple of $15 bucks it had lost in the early trading, but still closed down $12 on the day, while the euro inched higher, and most of the other currencies treaded water the rest of the day.

The U.S. Data Cupboard was dry as a bone yesterday, and will only have PPI (Wholesale inflation) and CPI (consumer inflation) these next couple of days to show us… The fireworks for data comes on Friday, Flag Day, when Retail Sales, Industrial production, Capacity Utilization, and more will print… So, hang onto your hats come Friday morning!

With no data yesterday, the dollar was playing the “no news is good news” trick, but then President Trump put an end to that! I’ve got a good article for you in the FWIW section today about the Trade War with China, so you’ll not want to miss that… It comes up in a few reading minutes, so hang on….

The Chinese renminbi moved lower yesterday, in response, I would think, to the Trump comments about the G-20 meeting… You see, China has not agreed to any meeting as of yet… And there’s some fear that Xi won’t meet with Trump… Come on boys, why can’t we all play nicely together in the sand box?

The Russian ruble has been stealth-like with its recent strong move… And for once, in a blue moon, ( Billie Holiday song) , the ruble is moving without the price of Oil as a crutch… it was about a month ago, that I waxed poetically about the ruble… So, it’s nice to see it moving in the right direction… And why not? The ruble sports the highest deposit rate among established countries, and now it looks as if the interest rate spread, if you will, between the ruble and other currencies is going to widen, given what I’ve been telling you about the Fed, and the ECB… And the Swiss and so on…

Oh, and the euro wannabes , zloty, forint, and koruna continue to ratchet higher not only VS the dollar but also against sterling and the euro… Very interesting moves here folks… I’m telling you once again, so you can hear me later, these three are a good indicator that a weak dollar trend is coming…

I read yesterday where the flows of capital out of S. Africa are really becoming a problem for the country, and it’s being reflected in the drop in the price of the rand. I’ve said this now for the 27 years that I’ve been writing the Pfennig… I wouldn’t touch rand with your ten foot pole!

So, like I said above, the U.S. Data Cupboard doesn’t really have a lot for us to see until Friday, Flag Day, but we will see PPI (wholesale inflation) today for May… The thing to look for here is that in recent prints PPI has dropped, and so we’ll want to see if that trend continued in May… I would think it did. 

We’ll also see the NFIB Small Business report for May, which isn’t market moving but interesting nonetheless. 

There’s just no life preserver we can throw Gold once the price manipulators go to work on the shiny metal…  And it looks like today won’t be any different for Gold, as it’s already down $6 in the early trading today…  Doesn’t make any sense to me, given the interest rates around the world and the outlook for them here in the U.S. 

Speaking of interest rates here in the U.S. The Fed’s FOMC Meeting will take place next Wednesday 6/19. I wonder what Fed Chairman Powell, has up his Bullwinkle sleeve for us?  The markets don’t believe that the Fed has the intestinal fortitude to cut rates next week…  It’s sort of like the old Charles Atlas commercials, where the big muscle bound man kicks sand in the face of the weak man…  The markets are the big muscle bound man, in case you were confused on that one! HA! 

OK.. the yield on the 10-year Treasury has slipped higher once again. Last week it was down to 2.10%, and this morning its yield is 2.17%…  What gives? Well, remember what I’ve been telling you about China and other Central Banks selling Treasuries and buying Gold?  Well shame on you if you didn’t remember! HA!  But it makes sense when you fold that into the equation… Remember bond yields and price move counter to each other, so as Treasuries are getting sold, the price goes down, and the yield goes up…   Something to watch for, and keep in mind, for sure… 

To Recap…  The overnight moves to bring the dollar back from Friday’s downward move, petered out in the U.S. session, and the currencies treaded water for most of the day… The dollar bugs had a slam the brakes on moment, when President Trump announced that if China’s leader, Xi, doesn’t meet with him at the upcoming G-20 meeting that more tariffs will be placed on China… China said they were unaware of any meeting! 

For What It’s Worth… Well as previously mentioned, this is an article about the trade war with China, and how China views it, and it can be found here: https://www.cnbc.com/2019/05/27/china-is-digging-in-its-heels-on-protecting-a-state-run-economy.html

Or, here’s your snippet: “ As trade talks between the U.S. and China increasingly center on Chinese treatment of foreign companies, Beijing says major American complaints about structural aspects of its economy are running up against “core interests.”

The implication: Those matters are not up for negotiation.
Previously, the vague “core interest” term was generally understood as referring to Beijing’s territorial claims, such as those on Taiwan. But a commentary piece published this weekend by state news agency Xinhua emphasized that China will not yield on its prerogative about how to manage its economy.

The Chinese-language article published Saturday claimed there were five ways in which the U.S. is harming the growth of the global economy by launching a trade war with the Asian giant.

“At the negotiating table, the U.S. government has made many arrogant requests, including restricting the development of state-owned enterprises,” the commentary said, according to a CNBC translation. “Obviously, this is beyond the field and scope of trade negotiations, (and) touches upon China’s fundamental economic system.”

Chuck Again… To me… it looks like the Trade War is just getting started, and is nowhere near coming to a conclusion!

Currencies today 6/11/19 American Style: A$.6955, kiwi .6581, C$ .7541, euro 1.1320, sterling 1.2705, Swiss $.9911, European Style: rand 14.7443, krone 8.6379, SEK 9.4355, forint 283.32, zloty 3.7697, koruna 22.6587, RUB 64.74, yen 108.70, sing 1.3645, HKD 7.8348, INR 69.39, China 6.9244, peso 19.16, BRL 3.8790, Dollar Index 96.77, Oil $14.68, 10-year 2.17%, Silver $14.68, Platinum $804.91, Palladium $1,386.46, and Gold… $1,322.20

That’s it for today… I  so was pumped about adding the link to Delaney’s singing of the national anthem that I forgot to mention yesterday that it was good friend Mike Kettler’s birthday… Happy Birthday Mike! The Cardinals found a team that they could beat last night when they beat the Marlins… Like I said yesterday, this is a strange team this year, that can’t seem to find any good karma… And now with every loss, it’s even more evident that each guy wants to hit a 10-run homer, each time he comes up… UGH! I’m going to play Horse Hooky today! Although it’s not really playing hooky when you’re retired, but that’s what they call it, and I’m all in! YAHOO! Oh and thanks to all that sent along nice notes about Delaney’s performance… I’m just so proud of her! Elton John takes us to the finish line today with his song: Mona Lisas and Mad Hatters… I hope you have a TOM TERRIFIC Tuesday today, and will Be Good To Yourself!

Chuck Butler