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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