Keeping Up with the Watanabes
May 30, 2017
Dennis Gartman is editor and publisher of The Gartman Letter, and strategic advisor of the AdvisorShares Gartman Currency Hedged Gold ETFs (GEUR & GYEN). He regularly contributes to AlphaBaskets and lends his institutional insight to educate advisors and investors about commodities and the forex markets, including about trading gold in different currency terms.
The yen is strong; the euro is weak and the dealing desks around the world are being repopulated after yesterday’s holidays in the US and the UK. The focus in the forex market is the apparent “disagreement” between the US and Germany over Europe’s “fair share” of NATO/military expenditures with the media paying a great deal of interest to Ms. Merkel’s comments that the US can no longer be counted upon as an ally.
The Yen is firm as the “Watanbes” are again perceived to be taking their money home from abroad after the North Koreans once again fired a test missile Sunday from its eastern air field/launch facility into the Sea of Japan off of Japan’s western coast. One might have thought that money would leave Japan as a result of these missile tests and North Korea’s belligerence, but instead, the “Watanbes…” Japan’s correlative to the US Joneses… are acting quite rationally and are taking their money home from Europe and from North America “Just in case” something truly untoward were to happen in Asia. On a very personal level, we can understand this desire. The Watanabes want their money closer at hand and that is really quite understandable.
Finally, the EUR is weak and is justifiably so following Mr. Draghi’s comments yesterday before the European Parliament. Mr. Draghi made it clear… or certainly it was to us as we listened to his comments in real time… that he has every intention of continuing the ECB’s experiment with QE; that he is far more concerned about the possibilities of economic weakness rather than of economic strength and that deflation, rather than inflation, is his concern.