Currency Traders Still Buying Rate Hike Rhetoric – Ep. 85

* The U.S. dollar started out this morning on the defensive
* Government released CPI numbers generated a sharp reversal across the board
* Gold sold off, but closed slightly down against the dollar
* April CPI up just .1% on the month; year over year prices dropped -.2%
* Lowest CPI since October 2009
* Core CPI (excludes food & energy) rose .3%
* Biggest monthly jump since March 2006
* News sent dollar up on anticipation that rate hike will be more likely
* Inflation benchmark is just as real as the 6-1/2% unemployment goal
* Traders still haven't figured out that if we ever approach the goal, it will be moved
* Biggest factor within the .3% rise in the Core was +.7% in health care costs
* Biggest increase since January 2007 - prior to Obamacare
* Rising costs will slow consumer spending, weakening the economy and undermining employment
* Yellen in a press conference today did not actually project a rate hike
* It's all about extend and pretend; actually postponing the rate hike will buy the Fed some time before launching QE4
* Increased inflation as the economy cools down means stagflation
* The media is spinning increased inflation as good news
* Bad economic news released yesterday:
* Unemployment numbers came out higher
* Fewer hires mean fewer fires
* Chicago Fed National Activities Index came in at -.15
* Three month moving average down to -.23
* MAY PMI expected to rise to 54.6 unexpectedly declined to 53.8 - lowest lever in 16 months
* Bloomberg Consumer Comfort Index continued to slide from 43.5 to 42.4
* May Philadelphia Fed looked for a bounce back to 8; missed expectations with 6.7
* Missed expectations 5 out of the last 6 months
* Existing Home Sales expected improvement over March; dropped to 5.04 million
* Kansas City Federal Reserve Manufacturing Index missed expectations at -13; dropping for 5 consecutive months
* Economic data as bad as 2009 and inflation is getting worse
* Janet Yellen acknowledged underlying issues with unemployment number, mentioned discouraged and part-time workers
* Labor Force Participation Rate is not improving
* Low-skilled jobs in jeopardy with minimum wage hikes
* $15/hr fever will further hurts employment and erodes the tax base
* Higher minimum wage will transform workforce because employers will hire better workers for the higher wages
* Movement will substitute technology for labor costs
* Minimum wage hikes will undermine the economic recovery that Janet Yellen pretends is existing
* So she can continue to pretend that the Fed's monetary policy is working
* And she can pretend that they can actually raise interest rates
* In the unlikely event Yellen tests a rate hike, they will have to acknowledge that they were wrong
* The Fed can always blame the data for deciding not to raise rates and therefore save face
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