Sterling soars on rate hike talk...
Currencies rebound to end choppy week...
What's with traders these days?
Good Day... And a Happy Friday to one and all! Let's go ahead and proclaim that this is going to be a Fantastico Friday! Cards and Cubs in a day game today, I had ice cream last night in the form of a shake, ymmmmmmy! And this is about a big of a 3-game series at this time of year as you can have! Go Cards! And R.E.M. greeted me this morning with their song: The One I Love... Back in the 80's to the mid 90's, you couldn't find a more popular band than R.E.M... But time waits for no one, and it didn't wait for them...
Whew! Yesterday, I watched the currencies and metals slog through a day with some gaining, some losing ground, and some trading sideways... Until... There was news that N. Korea fired another ICBM over the country of Japan. I think that N. Korea's leader, wanted to show that he could do just what he was talking about earlier in the day, when he expressed anger and said that he would sink Japan and reduce the US to "ashes and darkness" for leading the latest UN Security Council sanctions imposed on the country.
Gold shot higher on the news, as it should, and the dollar sunk a bit more, not much but some. In the overnight markets where they have to deal more with N. Korea, things were a bit more serious and trading picked up steam. But the shiny metal ran into some problems in the overnight and early morning markets, and gave back all those initial gains...
Wait! What? N. Korea shows it could sink Japan as they shouted out during the day, and traders are becoming numb to the goings on with N. Korea? Well, that's what it seems like to me... Yen got whacked, as it should when the missiles are directed at your country, but Gold couldn't hold its gains, and U.S. Treasuries, which I'll talk more about in a minute, didn't see any love thrown its way? I question the thought process here by traders, becoming comfortably numb with N. Korea...
Tell me if you've heard this one before... The Bank of England's (BOE) Gov., Mark Carney, said after leaving rates unchanged at yesterday's BOE meeting, that "the majority of the members of the Monetary Policy Committee, myself included, see that the balancing act is beginning to shift, and in that order to return inflation to that 2% target in sustainable manner, there may need to be some adjustment of interest rates in the coming months." -Mark Carney...
I've documented in these letters over the years how many times that Mark Carney, as Gov. of the Bank of Canada, and now the Gov. of the Bank of England has talked up the need to remove accommodation (rate hikes) and they never materialized.
So, I was surprised to see pound sterling traders respond so favorably toward Carney's rate hike talk... the pound jumped from yesterday morning's 1.3206 to 1.3390 in trading last night... That's a HUGE jump in one trading session folks, especially for a currency that has so many questions marks around it with BREXIT, and Carney's past promises to hike rates that never materialized!
And traders didn't stop at 1.3390, and took the pound even higher throughout the overnight markets to 1.3590! WOW! While I find it refreshing that fundamentals weighed in here, I also find that this trade has been overcooked, in my opinion... which could be wrong, but what the heck, that's what I'm here for!
And on the opposite end of the spectrum, the Japanese yen got whacked once it was confirmed that N. Korea had fired an ICBM over the islands nation. Normally, you would see yen bought as a so-called "safe haven currency", but when the missiles are flying over Japan, the yen gets left out of the so-called "safe haven currency" buying... That left the safe haven buying to euros, Gold, and Treasuries... And as I said above, traders have become comfortably numb with N. Korea, so there was no need for "safe-haven" buying... I shake my head in disbelief, here folks...
Speaking of Treasuries... Have you been noticing in the currency roundup that the yield of the 10-year Treasury has been rising again? Just 9 days ago the 10-year Treasury yield was 2.08%... And this morning it is 2.20%... I don't have a Bloomberg to do bond calculations on any longer, for if I did I would show you what that 9 Basis Points move in the 10-year's yield would be in dollar price... I think it would amaze you how much the dollar price moves with each basis point move..
But, overall the currencies, for the most part, have rebounded this morning, led by the euro, which is right back to where it was to start Tuesday morning trading... Up, down, up down, it's been quite a choppy week for the currencies, as they failed to display any of the signs that a new weak dollar trend has emerged... UGH!
But that's not anything to be concerned about, just yet... You see, when these currency trends end, and a new one begins, it takes a while before everyone is on board with the new trend... There are always those die-hards that believe their strong trend will last forever. But trends don't last forever, and the sooner they get that through their thick heads, the sooner we can get down to not having choppy weeks of trading!
Now, mind you, that doesn't mean we won't see volatility in the currencies, for there's always volatility inside a current trend... Sorry, but there's no ONE_WAY Streets here...
The Aussie dollar (A$) saw some selling yesterday that brought the A$ back below 80-cents, briefly, but below the figure nonetheless.. The A$ is back above the 80-cent figure this morning, looking none the worse for its trip through the gauntlet. The A$'s kissin' cousin across the Tasman, kiwi, is going through the paces of recovering after getting whacked earlier this week. Kiwi had climbed to 73-cents, and then it was as if a trap floor, sprung open under kiwi causing the currency to fall, quickly... But, like I said, it is recovering, albeit at a slower pace than it fell! UGH!
The price of Oil is inching closer to the $50 figure once again this morning... talk about up, down and all around! But then if you had signed up for the Dow Theory Letters and read my weekly letter that talked about the Oil price, this up, down and all around wouldn't be a surprise to you....
What's with all the bad-mouthing of BITCOIN lately? Earlier in the week I told you that JP Morgan's Jamie Dimon called BITCOIN a fraud, and then yesterday, Mexico's Hugo Salinas Price said that, "bitcoin is just another mass speculation that will burn a lot of people eventually." And yesterday, Bloomberg ran an article that said that investors are calling BITCOIN the most overcrowded trade... I'm just wondering why, suddenly, we have these statements, of which I'm sure there will be more, piling on, if you will. Oh, well, cryptocurrencies are not my bag baby, so I'll just move along...
Gold saw a HUGE number of contracts with its name on them yesterday... 325,000 to be in the ballpark of pile of contracts traded... That's HUGE folks, and of course there had to be quite a few short Gold paper trades submitted by "the boys in the band"... In the end, Gold went up, and came back down and is trading in yesterday morning's clothes this morning at $1,327...
The U.S. Data Cupboard yesterday, had the stupid CPI, which printed with August in mind, and reflected a 0.4% gain in the month, which is HUGE for this data set... But as I said yesterday that I thought it would, the Year on Year figure was still below 2% at 1.9%... It'll be interesting to see if September's figure can add to the August gains in inflation...
Today's Data Cupboard finally gets back to yielding some real economic data prints.. Leading off an plying right field today is Retail Sales for August. The BHI (Butler Household Index) suggests that this report will disappointing... And then two of my fave prints will show their respective colors, when Industrial Production (IP) and Capacity Utilization (CAPU) go down the cat walk... And again, I think these two will be disappointing, as they are not expected to show much in gains.
To recap... N. Korea shoots an ICBM over Japan and initially Gold gains, but is later sold off, as traders appear to have become comfortably numb with N. Korea, which Chuck thinks is a mistake... Mark Carney (BOE) is making promises again, and traders believe him, and the pound soars on rate hike talk.. But overall the currencies, for the most part, are recovering their losses this morning, after a very choppy week of trading...
For What It's Worth... I thought I switch things up a bit today, since its a Fantastico Friday! A few weeks ago in the Dow Theory Letters I wrote about the trend that's taking us to a cashless society... And one reader sent me this response, which if it weren't eerily what I was talking about, would be funny... So here it is... enjoy!
Hello! Gordon's pizza?
- No sir it's Google's pizza.
- So it's a wrong number?
- No sir, Google bought it.
- OK. Take my order please.
- Well sir, do you want the usual?
- The usual? You know me?
- According to our caller ID, in the last 12 times, you ordered pizza with cheeses, sausage, thick crust.
- OK! .
- May I suggest to you this time ricotta, arugula with dry tomato?
- What? I hate vegetables.
- Your cholesterol is not good.
- How do you know?
- Through the subscribers guide We have the result of your blood tests for the last 7 years.
- Okay, but I do not want this pizza, I already take medicine.
- You have not taken the medicine regularly, 4 months ago, you only purchased 30 tablets at Drugsale Network.
- I bought more from another drugstore.
- It's not showing on your credit card.
- I paid in cash.
- But you did not withdraw that much cash according to your bank statement.
- I have other source of cash.
- This is not showing as per your last tax form unless you bought them from undeclared income source.
- WHAT THE HELL? Enough! I'm sick of Google, Facebook, Twitter, WhatsApp. I'm going to an Island without internet, where there is no cell phone line and no one to spy on me.
- I understand sir but you need to renew your passport; it expired 5 weeks ago........
Chuck again.... Yes, that's the kind of world we'll have when there's no cash folks... think about it!
Currencies today 9/15/17... American Style: A$ .8016, kiwi .7265, C$ .8221, euro 1.1947, sterling 1.3575, Swiss $ .9606, ... European Style: rand 13.1890, krone 7.8528, SEK 7.9635, forint 258.55, zloty 3.58, koruna 21.8209, RUB 57.64, yen 111.27, sing 1.3445, HKD 7.8158, INR 64.08, China 6.5524, peso 17.70, BRL 3.1295, Dollar Index 91.84, Oil $49.82, 10-year 2.20%, Silver $17.76, Platinum $975.15, Palladium $927.73, and Gold... $1,327.50
That's it for today and this week! Well, the BIG 3-game weekend series between the Cards and Cubs begins this afternoon... I've been to Wrigley Field for Cards/ Cubs 3 times in the past, but they were in the years when the Cubs weren't very good, and the Chicago fans were very friendly to us visitors, but I would have to think that's changed with the tight race that's going on now... But maybe not... My beloved Mizzou Tigers attempt to get back on the winning side tomorrow when Purdue comes to play.. Both the Tigers and Cardinals will be on TV at the same time tomorrow, I guess I need to go get another outside TV! HA! Elvin Bishop takes us to the finish line today with his song: Traveling Shoes... That's a real move in your chair song, and I'm bopping along with Elvin! OK, time to get out of your hair today, and send you on your way to a Fantastico Friday! and please Be Good To Yourself! Oh, and one more thing... Today... is a good day for a good day!