A German IFO Surprise!
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In This Issue.

* Euro rebounds after overnight selloff.

* Krone and ruble.. a strange couple.

* Data to dominate Tuesday & Wednesday.

* SNB doesn't want to be weakened.

And Now. Today's A Pfennig For Your Thoughts.

A German IFO Surprise!

Good Day!... And a Marvelous Monday to you! I stopped for gas this morning, and while standing outside watching the gas pump ratchet the numbers higher and higher, a gust of cold wind came through and about knocked me over! Look, for those of you who have met me in person, you know that just thinking that I could be knocked over by wind is a funny thought, and one that you would have to think is preposterous! Well.. I was there. And brother was that wind nasty-cold! And then that disgusting walk across the wind tunnel bridge! Get me out of here! I gotta go where it's warm!

Well that same cold wind hit the euro last night, as the Asian markets got to trade the euro based on the Draghi comments from last Friday morning. The single unit fell below 1.24, but has rebounded in the European Session, after a better than expected German IFO. Almost like a stay of execution for the euro, given the way Draghi, the European Central Bank (ECB) President has been treating his currency. The rest of the currencies except the Norwegian krone, and Russian ruble are still in the red on the day, after the Asian session left most of the currencies looking for a bid.

So, what was up in Germany this morning that turned the euro around (for now)? Well, looky there, it was a better than expected German Business Confidence report, as measured by the think tank, IFO. It was the first increase in this index in 7 months, and it was like the IFO was saying to Mario Draghi, "Whoa there partner! There's no need to go all Japan and U.S. on us here!" For those of you keeping score at home, the IFO index printed at 104.7 VS 103.2 in Rocktober. So, the euro has climbed back above 1.24, for now.

In other news from Germany. It was announced this weekend that Germany had become the Eurozone's first hub for international settlements in Chinese renminbi/ yuan. More than 10 German regional and international banks opened accounts at Bank of China, Frankfurt, to facilitate the settlements in renminbi. And conversion fees are being kept low, involving selling dollars to buy renminbi between the parties.

The IMM Futures Positions that printed last week showed that long dollar positions are near an all-time record high. That tells me that this long dollar trade is getting crowded, and usually that brings about some shaving of those long positions. But, who knows these days. All I know is that the traders, hedge fund managers, institutional investors, Central Banks, etc. all believe that the dollar is the best looking horse in the glue factory right now. And I would say, not so fast! What about, let's see. The Chinese renminbi / yuan? Better fundamentals right? And the trend is in their favor right now. That's just one idea. but I doubt that those groups I just mentioned have any idea that there are better fundamentally backed currencies out there right now.

So, I told you above that the Norwegian krone was one of the few currencies with gains VS the dollar this morning. I've said for a long time now, that one day, Traders would have a V-8 head-slap moment, and realize that Norway's fundamentals are not the Eurozone's fundamentals, and stop trading the krone with the euro. I would like to think that today is the start of the new life above the euro for the krone, but I know better than to go out on that limb, for tomorrow it could read much differently, and where would I be then? Out on that limb! But wouldn't it be nice if we could wake up when the day was new, no wait! Wouldn't it be nice if my scenario for krone did begin to take place? I would stand outside with my mouth open wide, ah, ah, ah, ah, oh what a rain that would be! HA!

Yes, the cheaper Oil prices should play hell with Norway's finances, but think of it like this. Norway built its huge Sovereign Wealth Fund (the world's largest ), its surplus of reserves, its fully paid pension plan for all Norwegians, and so on, when the price of Oil was much cheaper than it is now, so they should remember how to deal with that sort of thing. They didn't just fall off the turnip truck!

The currency trading unit at Bank of America/ Merrill Lynch (BAML) believes that the one of the top FX trades next year will be to sell Swiss francs and buy Norwegian krone.. Well, that's for the traders to figure out how to do. For me, I'll just stick with my high regard for krone!

I received quite a few notes on Friday's Pfennig from dear readers, who basically said, "We can tell you're feeling much better today, the Pfennig today was full of information and great writing." WOW! Talk about making me feel good! I had an awful weekend, sort of like the nasty cold, rainy, windy weather outside. But this week is Thanksgiving, so. I have to will myself to be able to partake in Thanksgiving dinner!

There, that was one of those change-ups I've told you about. We just shifted gears, put the ball back deeper in my hand, and end up here. Speaking of the Swiss franc, The Swiss National Bank (SNB) President, Thomas Jordan, was out speaking against the Swiss Gold Referendum this past weekend, from the church pulpit. He continues to say that the Referendum would be dangerous for the Swiss, because it would weaken the SNB. And I would say, to him, and that's a bad thing because? Weaker Central Banks and Central Bankers would be right up my alley for what's needed in the world today.

Regarding the Referendum. The latest poll with just 6 more days to go until the vote takes place, still shows quite a few voters are still undecided. Those that are undecided will determine if this Referendum passes or gets defeated. The SNB has done a good job of scaring the Swiss voters into believing that a weaker SNB is a bad thing. Of course if I were in Switzerland and running the Referendum passage group, I would publicly point out that it was the SNB that devalued the franc 3 years ago, and has kept it under wraps tying it to a euro cross rate of 1.20. Maybe the Swiss voters would then see, that a weaker SNB probably isn't such a bad idea.

Well, the U.S. Treasury 10-year yield, is stuck in the mud and hasn't really moved much in the past couple of weeks. I know I've described this before to you, as the bond market traders not getting on board with the Fed that the economy is strong. I was taught many years ago, when I first began trading short term instruments, like CDs, BAs, Commercial Paper, and Treasury Bills, and I sat next to the Treasury bond trader, that when the Treasuries get stuck in the mud like this, that they are signaling that the dollar shouldn't go anywhere either. Back then I wasn't that interested in what the dollar was doing, I should have been, for this was pre-Plaza Accord, and from there, I began to take notice.

So, if that old thought about Treasuries and the dollar's movement holds true, and that crowded long position shaving begins to take place, we could see some interesting movement before the Holiday shortened week closes up on Wednesday around noon. Yes, the boys and girls in NY will want to get out of Dodge and head for the Hamptons and their Thanksgiving celebrations early on Wednesday, and then on Friday, it will be skeleton crews on all desks, so there's always a chance for wild swings when there's little volume, but with no data prints on Friday, there will be little chance for a wild swing.

Speaking of data. On Wednesday, there's so much data to print and go through, I'll feel like I had Thanksgiving dinner a day early! And Tuesday is no slouch either! Although Wednesday's veritable Whitman's Sampler of data prints will have far more market moving, and interesting data to view. Like Durable Goods Orders, and Personal Income and Spending. So, starting tomorrow, you'll need to be strapped in, with arms and legs inside at all times to go on this data ride!

And data isn't confined to just the U.S. this week. We'll be inundated with data from all over the globe. And a lot of it is due to print on Thursday, when I'll be stretched out in my recliner, watching, first the parades, then football games. last year, with my new Big Green Egg smoker I smoked a Turkey, to go along with our traditional roasted Turkey. I'm not doing that again this year, so, its parades and football games for me! But the rest of the globe will see data from Canada, Australia, New Zealand and the U.K.

For today, we have ECB member Weidmann speaking this morning, and he is known as a someone that has stood toe to toe against Draghi before, so it will be interesting to see if he wants to counter Draghi's words last Friday morning that basically deep sixed the euro. Point/ Counterpoint. Remember that skit on SNL? That just put a smile on my face, as that used to be quite funny stuff!

In Singapore. Late last week, Singapore's latest inflation data, showed inflation weakening, and that's not a good thing for the Sing dollar (S$). Long time readers know that the Monetary Authority of Singapore (MAS) sets the band that the S$ can trade in, and does this by gauging how strong the S$ needs to be to fight inflation. But if inflation is weakening, (I guess the stronger S$ did the trick!) it could mean that the MAS narrows the band for the S$... Well, look at it like this. Over a week ago, I told you that the Asian currencies were going to have to respond to the weakening of the Japanese yen. So, this goes hand in hand with that thought.

On Friday, I told you about the Chinese decision to cut rates for the first time in 2 years. I fully expect the Chinese to cut rates again, and to lower their reserve ratio for banks, going into the end of the year.. Things are slow in China's economy, but not at a standstill, so a little goosing of the economy is what the doctor ordered here. Again, this is what a country is able to do when they have not willy nilly cut rates to the bone already, and have a treasure chest of reserves to play with.

Gold, which saw a nice gain on Friday, back to $1,200 and above, has given back $5.50 of that move on Friday in early morning trading. I read this morning on the Bloomberg that Hedge Funds added bullish Gold wagers at the fastest pace since June, on the Central Bank actions of last week.. You know, Japan, Eurozone, China and so on. I just don't understand why everyone and their brother doesn't understand all these Central Bank movements are supposed to be good for Gold's price! But, they don't, and until they get it through their thick skulls, and have a V-8 Head slap moment, Gold will struggle. I did read on Google+ this weekend that Ukraine had to sell gold to help iron out payments that were owed.

The Righteous Brothers are singing: Just Once In My Life. When Bill Medley sings: That old Pot of Gold, ain't so easy to find, in that thundering deep voice, brings chills to my spine, and if it doesn't yours, then you need to find out what's wrong!

The U.S. Data Cupboard is basically empty today, and then picks up the pace, as I described above, tomorrow. Friday's Data Cupboard's was also empty.. So, why do they have tomorrow and Wednesday chock-full-o-data when they could even it out on days like Friday and today, with no data? Ahhh, just one more thing if Chuck were King, that would be changed!

For What It's Worth. Well, I've harped and harped about the CFTC and their inability to see the price manipulation of short paper trades in amounts larger than the total of mined metals, and I told you recently about how this whole mess might have congressional investigation tied to it. Well, here we go. Of course I doubt any of this does what it needs to do, to take the paper trades away from the price manipulators, but maybe, we can keep wishin and hopin and thinking and prayin. OH! I found this on the Bloomberg.

"The Federal Reserve may curtail Wall Street commodity businesses after lawmakers said banks' role in energy, power, and metals markets spurred unfair trading advantages and could threaten financial stability.

At a Senate hearing today, Fed Governor Daniel Tarullo said curbs under consideration include ownership limits, restricting how much revenue can be derived from commodities, and requiring Wall Street firms to boost capital. He said the new rules, to be proposed early next year, could restrict banks from investing in oil tankers, coal mines, and other businesses involved in physical commodities.

"We are focusing on the risk to safety and soundness presented by specific activities and on whether those risks can be appropriately and adequately mitigated," Tarullo said at the hearing held by the Senate Permanent Subcommittee on Investigations."

Chuck again. I would probably cry a river of happiness if something "real" came of this.

To recap. The dollar holds the hammer on most currencies today with only the euro, ruble and krone carving out gains, and the euro's gain has come after a big selloff in Asia as they got caught up with Draghi's throwing the euro under the bus on Friday. German IFO unexpectedly rose for the first time in 7 months, and that turned the euro around. IMM long dollar positions are at an all-time high, which tells Chuck that the trade could be getting crowded. Data will rule tomorrow and Wednesday, as the Data Cupboard gets restocked to the max. Singapore's inflation drops. And Gold loses $5 this morning to start the week.

Currencies today 11/24/14. American Style: A$ .8630, kiwi .7870, C$ .8890, euro 1.2415, sterling 1.5685, Swiss $1.0320, . European Style: rand 10.9855, krone 6.7815, SEK 7.4510, forint 245.45, zloty 3.3790, koruna 22.2405, RUB 45.04, yen 118.30, sing 1.3035, HKD 7.7570, INR 61.91, China 6.1420, pesos 13.64, BRL 2.5345, Dollar Index 88.22, Oil $76.61, 10-year 2.33%, Silver $16.35, Platinum $1,218.13, Palladium $791.60, and Gold. $1,195.21

That's it for today. A great win for my beloved Missouri Tigers on Saturday night in Tennessee! I told you last week that no one outside of the state of Missouri thought we would win that game, and in the end the Tigers dominated the game, the score ended up closer than the game would indicate it should have been! And our Blues figured out how to score goals on the road, finishing up their road trip with 2 wins! It wasn't such a good day for our Rams, as they found a new way to lose a game yesterday. Can you believe that Thanksgiving Week is here? How did that happen? The Grand Jury will most likely make their announcement on whether to indict the officer in the death of a teenage boy in Ferguson, a suburb of St. Louis, today. I know you all saw snippets of the debacle in Ferguson last August, I hope that any demonstrations are peaceful. I saw my St. Louis oncologist on Friday, and it wasn't long after, that I had to leave my friends and head home and that's where I remained all weekend. UGH! Alrighty then.. Let's all go out and make this a Marvelous Monday!

Chuck Butler
EverBank World Markets

Posted 11-24-2014 5:46 PM by Chuck Butler
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