Chuck Butler’s: A Pfennig For Your Thoughts 

January 5, 2018  

* Currencies hold their ground… for now.. 

* A Day of Reckoning for the BLS?

Good Day… And a Happy Friday to one and all! The end of a short week. I love short weeks! Not that I want to see time fly by, it’s just a matter of getting to Friday! Well, the infectious disease doc was good to me yesterday, and she set me free to move about the country! The PICC-line comes out this morning, and let the countdown to Tuesday morning’s departure for warmer weather begin! Radiohead greets me this morning with their song: Karma Police…  

The currencies held their ground yesterday, and much like Ralphie did they fought back against the big bad bully, dollar. They didn’t gain much, but they sure didn’t lose ground either, so it was a day off the calendar and one less day of the dollar’s role as the reserve currency of the world. Boy, I didn’t beat around any bushes there did I? I went straight for the jugular of the dollar!

Yeah, I did that on purpose, for I could have said that it was one less day of the strong dollar trend that keeps helplessly holding on to its former position as lead dog. Right now, the dollar, to me, reminds me of an old baseball pitcher that still believes he can throw the ball by the young stud hitters, but when he’s called on to do that, it gets ugly for him… And that’s why I decided to just go straight to the jugular this morning. 

Of course it would have helped my thoughts this morning if the currencies had remained well bid throughout the night, but nooooooooo! It appears to me that some profit taking took place, as the currencies have backed off their figures from last night, but the downward move was very small… 

So, it appears that we’ll end the first week of the new year with the currencies up and the dollar down. The price of Oil is also up for the week, as are the precious metals, led by Gold, which has found its way back to the $1,300 level this week. 

Today’s trading in these assets could bet a little dicey, as it is a Jobs Jamboree Friday here in the U.S. And if the ADP Employment Report is any indication of what the BLS has in store for us today when they print their version of a Jobs report, then we could very well see the dollar rebound to end the week.  The ADP Employment Report showed 250,000 jobs created in December. WOW Of course a lot of them were seasonal workers, but 190,000 was expected, and 250,000 printed, that’s quite an upswing, eh?

So you see why I said if the ADP report was any indication of what the BLS prints then we could see the dollar rally to end the week. We have the same expectations for the BLS report this morning… 195,000 jobs are expected to have been created in December. I would think that given all the hedonic adjustments the BLS made to the jobs totals in 2017, that they have to have a day of reckoning at some point, and starting the year with one seems to be the logical and right thing to do. Of course not implementing the hedonic adjustments in the first place would be the “right thing to do”

But what IF the BLS does have their day of reckoning today? That would mean the risk is to the dollar for the jobs report totals wouldn’t be near the expectations on the downside. Oh, what I’m I talking about here? The BLS is NOT going to admit their hedonic adjustments were wrong throughout the year, so just move long here, for these are not the droids you’re looking for!  

In the Eurozone this morning we saw the color of their wholesale and consumer inflation prints for December… PPI year on year was up 2.9% VS 2.4% expected. So, quite an upward swing, and that should filter through to CPI(consumer inflation) as we go along in 2018. Eurozone CPI in December for a year on year look was up 1.4%…  which is down from the previous print of 1.9%, but with PPI burning a whole in CPI’s pocket, I believe December will be written off as a “one off” month. 

I don’t think the European Central Bank (ECB) will be fooled by this downward move in CPI in December, and their plans to begin to dismantle their balance sheet are all not going to be jeopardized. Speaking of dismantling the ECB’s balance sheet.. With the beginning of the New Year, that dismantling has begun. Recall the ECB told us that it will start out small and build to a large crescendo. 

Like I said yesterday, we’ve never, in the history of the world, had two major Central Banks implementing balance sheet dismantling at the same time before… This is going to get interesting folks… Time to get out those journals that we’ve used in the past to record the happenings in the markets…  

Well, there’s not much going on in Asia, the saber rattling has calmed down, and the data flow has pretty much dried up, until Sunday, when China will print their latest reading of their reserves, which should have remained above $3.1 Trillion.  I say that it should remain there because as far as I can see, and have read, the outflows of capital have slowed tremendously, thus removing the need for the Peoples Bank of China (PBOC) to defend the renminbi by selling their reserves and buying renminbi. 

That scenario is what was going on for a lot of 2017, but like I said above, that scenario has dried up tremendously, thus removing the need to defend the renminbi. 

Coming back over to this side of the oceans, either from the Eurozone or China, I had to laugh out loud when I read an article title this morning on Bloomberg… It read:  “Mexico’s peso expected to make a Big comeback”… I laughed and said, “why, is Mexico going to aggressively hike rates to double digits? Otherwise I see nothing behind this comment”…    

Gold had a nice day yesterday gaining more than $9 on the day, the shiny metal is down $3.80 in the early morning trading this morning, so the old metal trading shuffle is still being danced… Like I said yesterday, I’ll sit this dance out and just let the traders have the dancefloor until a steady trading patter forms, which will probably look like a conga line, to which I’ll gladly join…   

The U.S. Data Cupboard has some additional prints today… The Trade Deficit will print, along with the Nov. Factory Orders, which should reverse the Rocktober negative print of -1.7%…  But the markets will be focusing on the jobs numbers… So get ready for that!   

To recap…  The Currencies held their ground yesterday, but has seen some weak selling in the overnight markets ahead of the Jobs Jamboree that will take place this morning.  The Eurozone printed some mixed inflation numbers with PPI shooting higher, and CPI dropping, which Chuck thinks will be a one and one for CPI dropping. Gold had a nice day gaining $9 but is down $3.80 in the early morning trading today. 

For What It’s Worth…. I was sent a link to an article on Forbes.com yesterday that had quite a different take on the Retail Sales for Christmas.. I thought that this information was very FWIW worthy! And so, here’s a link to the article… it’s long, but it does get here eventually…https://nam04.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.forbes.com%2Fsites%2Fpamdanziger%2F2017%2F11%2F29%2Fthanksgiving-weekend-retail-results-in-shoppers-will-have-merry-christmas-retailers-get-coal%2F%2342ad79081835&data=02%7C01%7C%7Cc0446748b7dc4818b8fd08d553d364a8%7C84df9e7fe9f640afb435aaaaaaaaaaaa%7C1%7C0%7 C636507089755308525&sdata=28Eh%2BVXZ5K0%2FNBU7yT0AtrWRL7BuuMlHd%2FPDygXvt9I%3D&reserved=0 

First, let me set the snippet up… The article gets into how Retailers used huge discounts to sell their wares this year, and how those discounts will come back to hurt them, as they have tons of bond due in the next few years starting with this year, and their profit margins have been skimmed down… Will we see retailer defaults on bonds?    I apologize for no snippet, as the cut and past option isn’t working on the Forbes site this morning…

 Currencies today 1/5/18… American Style: A$ .7845, kiwi .7157, C$ .7996, euro 1.2053, sterling 1.3545, Swiss $1.0235, … European Style: rand 12.3683, krone 8.0787, SEK 8.1487, forint 256, zloty 3.4462, koruna 21.1945, RUB 57.05, yen 113.30, sing 1.3270, HKD 7.8203, INR 63.25, China 6.4966, peso 19.29, BRL 3.2331, Dollar Index 92.03, Oil $61.40, 10yr 2.46%, Silver $17.20, Platinum $963.57, Palladium $1,097.68, and gold… $1,317.86 

That’s it for today… I had grand plans to get this in your email box before the Jobs Jamboree started, but that didn’t happen! UGH! Our Blues made it two in a row with a win last night against Las Vegas, who for an expansion team has done quite well so far this year. No more getting up in the middle of the night to hook myself up to the antibiotics. YAHOO! Of course when you get right down to it, doing that was far better than dealing with the pain of the infection! My beloved Missouri Tigers host the Big Bad Florida Gators tomorrow, I won’t want to miss that basketball game! And the Beautiful voice of Dusty Springfield takes us to the finish line today with her song: Wishin’ and Hopin’..   And with that, let’s go make this a Fantastico Friday, and Be Good To Yourself!    Chuck Butler

 

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