Reuters/Abhinav Ramnarayan & Ritvik Carvalho/09-20-17
…[C]aught between a lull in U.S. inflation and a strengthening global economy, the market is uncertain whether the Fed will signal its third interest rate hike of the year or back off until prices rise more briskly.
“Fed members have become less hawkish of late, and that has started to weigh on the dollar,” said OANDA analyst Craig Erlam.
An accepted accounting practice is allowing around $13 trillion to 14 trillion of debt to be hidden from global corporate balance sheets, exceeding the roughly $10.7 trillion of declared debt, according to analysts from the Bank for International Settlements.
The culprit? Foreign exchange swaps and forwards, analysts Claudio Borio, Robert McCauley and Patrick McGuire said. These instruments allow money to be borrowed without treating it as debt on corporate balance sheets, muddling the picture of how worldwide obligations.
Daily Reckoning/James Rickards/09-15-17
Right now, the United States is officially $20 trillion in debt. Over half of that $20 trillion was added over the past decade.
And it looks like annual deficits will be at the trillion dollar level sooner than later when projected spending is factored in.
Basically, the United States is going broke.
…There’s only one solution left, inflation.
PG View: Despite massive and extraordinary efforts totaling in excess of $4 trillion, the Fed has failed to generate even 2% inflation. What does Rickards suggest? “The Fed can call a board meeting, vote on a new policy, walk outside and announce to the world that effective immediately, the price of gold is $5,000 per ounce,” says Rickards. Voila! Massive inflation.
“History shows that raising the dollar price of gold is the quickest way to cause general inflation. If the markets don’t do it, the government can. It works every time.” — James Rickards
The dollar has plumbed its lowest level in 33 months, succumbing to pressure from a combination of market concerns, ranging from hurricane damage and North Korea to the composition of the Federal Reserve and its policy direction.
The index measuring the dollar against a basket of its major peers fell 0.5 per cent on Friday to touch 91.011, a level not seen since January 2015.
The latest drop extends a decline that began in early January and now runs to a drop of 12 per cent for 2017.
PG View: Buy some gold to preserve your wealth . . .
The economy continues to grow weaker despite all of the Fed, Wall St. and media propaganda to the contrary. The economy is growing weaker due to the deteriorating financial condition of the consumer, which is by far the biggest driver of GDP in the United States. The only way the policy-makers can avoid a systemic collapse is “helicopter” money printing, in which printed cash or digital currency credits is, in some manner, distributed to the populace.
The Fed reported that non-revolving consumer debt (not including mortgage debt) hit $2.6 trillion at the end of the first quarter. Student loans outstanding hit a record $1.44 trillion. Recall that at least 40% of this debt is in some form of delinquency, default or “approved” non-pay status. Auto loans hit a record $1.2 trillion. Of this, at the very least 30% is subprime. A meaningful portion of the auto debt is of such poor credit quality when it’s issued that it is not even rated. Credit card debt is now over $1 trillion dollars and at a record level. The average outstanding balance per capita is $9600 per card for those who don’t pay in full at the end of the month. Just counting the households with credit card debt balances, the average balance per household is $16,000. The average household auto loan balance for all households with a car loan is over $29,000.
The data shows a consumer that is buried in debt and will likely begin to default at an accelerating rate this year. In fact, I’d call these statistics an impending economic and financial disaster.
PG View: And they wonder why this has been the weakest recovery since the 1930s . . . IF the Fed resorts to money printing as the solution, gold is going to go through the roof.
The US dollar has taken a hit after US consumer price growth failed to heat up as hoped in July.
The dollar index, which measures the buck against a basket of peers, made a hasty retreat as the latest figures showed consumer inflation undershooting analysts’ targets. At pixel time, it was down 0.4 per cent on the day to 93.03.
The latest in a string of underwhelming readings has fueled market concerns about how the Federal Reserve will react as it debates the path of future interest rate rises.
Bloomberg/Katherine Greifeld & Lananh Nguyen/08-04-17
Dollar bears, singed by the currency’s biggest rally since January, say they’re still holding their ground.
…[T]he dollar is merely back where it started the week against the euro, which held above a key technical level that it breached last week for the first time since August 2015. The dollar-bear camp can also take cheer in one observation: Expectations for the pace of Federal Reserve tightening barely budged on the report.
“It is more of a story of providing underlying dollar support at key levels rather than a full-on reversal,” said Alan Ruskin, global co-head of foreign-exchange research at Deutsche Bank. “Unfortunately for the dollar, the ideal dollar scenario needs a significant change in Fed expectations.”
The U.S. dollar hit a more than 2-1/2-year low against the euro on Monday on month-end portfolio adjustments and uncertainty over the U.S. political outlook after the departure of White House communications director Anthony Scaramucci.
The euro hit more than 2-1/2-year peaks against the dollar earlier in the session on month-end buying and euro zone inflation data that kept expectations for a more hawkish European Central Bank alive. It extended gains to trade as much as 0.8 percent higher against the dollar on the day after the New York Times reported U.S. President Donald Trump had decided to remove Scaramucci.
The White House later said Scaramucci was leaving the job after little over a week. Scaramucci’s departure follows one of the rockiest weeks of Trump’s presidency in which a major legislative effort – a healthcare overhaul – failed in Congress and both his spokesman and previous chief of staff left their jobs.
The U.S. dollar was broadly lower on Friday as a combination of underwhelming U.S. economic data and political uncertainty kept traders biased toward the euro and other world currencies.
The euro hit a session high after the release of U.S. second-quarter gross domestic product estimates that largely met economists’ expectations.
Some analysts pointed to a smaller-than-expected increase in U.S. labor costs, but others suggested the data was just an excuse for traders to continue the weak dollar trade that has sent the U.S. currency lower for much of this year.
PG View: Dollar weakness bodes well for the uptrend in gold.
The price of gold could see substantial upside as the U.S. dollar index continues sliding in value, some strategists are forecasting.
The greenback has declined nearly 9 percent against a basket of foreign currencies year to date as the likelihood of parts of President Donald Trump’s economic agenda getting underway has been called into question, and the prospect of further interest rate hikes from the Federal Reserve has pulled back.
The dollar index could certainly drop to the 92 mark (about 1.5 percent below its closing price Wednesday of 93.40), said Phillip Streible, senior market strategist at RJO Futures. And though these levels are important to watch in the dollar, what’s more interesting to him is the impact on gold prices and other commodities.
“We could really see other markets, like gold, push up through that $1,300 level. We could see silver recapture $18. We could see oil prices — they’ve already got some bullish fundamentals buoying them — but with the dollar selling off like this, you are probably going to see that … recapture $50 again,” he said Wednesday on CNBC’s “Trading Nation.”
PG View: There is nothing “hidden” about recent dollar weakness.
The U.S. dollar fell on Wednesday, erasing an earlier gain after the Federal Reserve was seen as striking a somewhat cautious note on inflation, which is seen as bearish for greenback.
The U.S. central bank said inflation was “running below 2%” instead of “running somewhat below 2%,” as it had in its June statement. The Fed’s preferred inflation gauge, the personal-consumption index, or PCE index, has tapered off to 1.4% growth over 12 months from a five-year high of 2.1%.
The Fed also indicated, as expected, that it would start to wind down its bondholdings “relatively soon” and kept interest rates unchanged, as had been widely expected.
PG View: The dollar index tumbled to fresh 13-month lows after the Fed’s announcement, providing on ongoing tailwind for gold.
Live Trading News/Paul Ebeling/07-18-17
Russia’s largest bank, state-owned Sberbank, announced that its Swiss subsidiary had begun trading in Gold on the Shanghai Gold Exchange.
Russian officials have signaled that they plan to conduct transactions with China using Gold as a means of marginalizing the power of the USD in bi-lateral trade between the 2 powerful nations.
The formation of a BRICS Gold marketplace could bypass the US Petrodollar in bi-lateral trade in the energy sector.
PG View: This is a big positive for gold, and bad news for the dollar.
Bloomberg/Lananh Nguyen, Brian Chappatta & Katherine Greifeld/07-18-17
Political gridlock in Washington is giving traders a fresh excuse to sell the dollar. But the outlook for central-bank policy is still its biggest threat.
The currency fell to a 10-month low Tuesday after Republican efforts to overhaul health care collapsed, sowing doubts about the prospects of President Trump’s economic agenda. Yet for all the focus on politics, shifting expectations for interest-rate differentials are at the root of the dollar’s 8 percent slide this year. Case in point: The yield advantage on 10-year Treasuries over German bunds has crumbled to the slimmest since November.
FT/Michael Hunter & Hudson Lockett/07-18-17
The weaker dollar is standing out front and centre on global markets as doubts about the Trump administration’s ability to enact its pro-growth policies of tax cuts and fiscal stimulus follow the demise of set-piece legislation to repeal Obamacare.
There is broader concern that the fillip given to global stocks by the prospect of reflationary policies in the US could have run too far, hitting European stock indices, although sovereign debt markets are calm, with yields holding steady.
…The dollar index, a trade-weighted measure of the US currency, dropped to its lowest level since September 2016, down 0.5 per cent at 94.629.
Bloomberg/Dennis Pettit & Alexandria Arnold/07-14-17
The dollar sank to a fresh 10-month low after closely watched gauges of U.S. inflation and retail sales missed estimates, casting a cloud over the outlook for monetary policy just days after testimony from Federal Reserve Chair Janet Yellen.
The U.S. currency declined versus its G-10 peers and was lower by almost 0.7 percent, its steepest drop since June as measured by the Bloomberg Dollar index. Amid broad greenback weakness, the Australian dollar rose to a 15-month high above 0.7800 and the pound reached its strongest in almost 10 months, approaching 1.3100.
…The odds of a Fed hike by year-end dropped to around 40% Friday, after Yellen testimony this week that the funds rate wouldn’t have to rise much to reach its neutral level. The FOMC meets July 25 and 26 and is expected to remain on hold after raising rates in June. Next week will also see the start of monthly housing data.
The U.S. dollar hit a more than nine-month low against the euro on Tuesday after the head of the European Central Bank opened the door to steps that might begin to reduce the central bank’s emergency stimulus to the economy.
Speaking to a conference in Portugal, ECB President Mario Draghi said the ECB could adjust its policy tools of sub-zero interest rates and massive bond purchases as economic prospects improve in Europe.
But any change in the bank’s stance should be gradual, as “considerable” monetary support is still needed and the rebound in inflation will also depend on favourable global financing conditions, he added.
The dollar sagged against its major peers on Monday, losing traction as U.S. Treasury yields stayed low amid fading expectations that the Federal Reserve to hike interest rates again later this year.
…The index had climbed to a one-month peak of 97.871 earlier last week, supported by expectations that the Fed, fresh from a mid-June rate hike, would tighten policy again as early as September.
But such expectations ebbed over the course of a week, with investors doubtful of another rate increase this year as U.S. data on balance have fallen short of forecasts.
“The main reason behind the weakness of the dollar, which has lost its upward momentum since the Fed rate hike, is U.S. yields stuck at low altitude,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.
The dollar fell against a basket of major currencies on Friday, recording its biggest one-day fall in three weeks, on persistent doubts whether the Federal Reserve would raise interest rates again this year due to softening inflation data.
The greenback also broadly weakened versus commodity-linked currencies, which got a boost as global benchmark Brent futures recovered from a seven-month low.
…Traders, however, were doubtful about another rate increase later this year as recent U.S. data on balance have fallen short of forecast.
Rises in U.S. interest rates will probably prop the dollar up over the next 18 months, but its multi-year run higher since 2012 looks to be over, strategists from British bank Barclays said in a note on Thursday.
…”We believe the USD super-cycle of the past five years is over: the cyclical divergence that helped the dollar in these years has likely peaked, not only because of the European recovery, but also because the U.S. business cycle is more advanced than in Europe,” Barclays said in an updated global outlook dated June 22.
The US dollar slipped to its lowest since the election of Donald Trump last November after a miss in the country’s job creation numbers in May.
At publication time, the dollar index was down 0.52 per cent against a basket of its major trading peers at 96.720 – the weakest since president Trump’s election.
The dollar was holding steady before the payrolls report which showed the US economy added 138,000 jobs last month (forecast: 185,000). Still May’s growth was enough to push the US’s overall unemployment rate from 4.4 per cent to 4.3 per cent – the lowest since 2001.
PG View: And gold is setting new 5-week highs.
The euro climbed to a fresh six-month high on Monday as the currency rebounded against the US dollar.
…The moves came after Angela Merkel, the German chancellor, told school students in Berlin that “the euro is too weak”, which she attributed to European Central Bank policy.
“The context she was saying this in was in her description over why Germany has such a high trade surplus but the euro moved anyway,” said Peter Boockvar, chief market analyst at The Lindsey Group.
The US dollar index is down by 0.2% at 97.890 as of 9:46 a.m. ET on Wednesday.
That brings the dollar back to roughly where it was just before the US presidential election. The index closed at 97.861 on November 8, the day of the election, according to Bloomberg data.
Analysts have suggested that the currency is suffering from the tumult of news coming out of the embattled Trump administration in the wake of the firing of FBI Director Jim Comey and bombshell reports that the president shared classified information with Russian Foreign Minister Sergey Lavrov and Ambassador Sergey Kislyak.
In particular, markets may be worried that the recent developments could stall the economically stimulative tax and infrastructure policies many investors hoped for after the election.
PG View: Are stocks destined to retrace their gains since November as well?
Goldman Sachs abandoned the two strong dollar plays in its 2017 trading recommendations on Tuesday, pointing to the Trump administration’s concerns over the strength of the currency and improvement in growth in rival economies.
“… a number of fundamentals have changed on the margin, such that the long-Dollar story no longer warrants a place among our ‘Top Trades’.”
PG View: If the dollar is out, it begs the question: Is gold in?
President Trump’s remarks last week about the dollar and US monetary policy offer more evidence that America’s strong dollar policy, launched in 1995 by Treasury Secretary Robert Rubin when the dollar was near post-war lows, is now changing.
The President said that a strong dollar “sounds good”, but added that “our dollar is getting too strong…it is very, very hard to compete when you have a strong dollar and other countries are devaluing their currency”. He also said that he “likes a low interest rate policy” and that Janet Yellen is “not toast”.