Olivia

Summary United States: War Not Yet Won on Inflation The December Consumer Price Index data was the most significant macroeconomic development of the week and showed modest deflation to finish 2022. We now expect the Fed to hike the federal funds rate by just 25 bps at its next policy meeting on February 1, but a slower pace of tightening does not necessarily mean less. Next week: Retail Sales (Wed), Industrial Production (Wed), Existing Home Sales (Fri) International: What’s Happening in the Rest of the World? Brazil’s December CPI data showed inflation receding less than expected. Over the past several months, inflation has sharply fallen from its peak, but with Lula now in office, fiscal policy may begin to move in a more inflationary direction. Down under, inflation pressures in Australia remain persistent. After receding from its 7.3% peak in October, headline CPI re-accelerated to 7.3% year-over-year in November. Housing, food and transport prices saw the most significant price rises. Last but not least, U.K. November GDP registered a surprise 0.1% month-over-month gain, lowering the likelihood that a U.K. recession occurred at the end of last year. Next week: China GDP (Tue), Canada CPI (Tue), Bank of Japan/Japan CPI (Wed/Thu) Interest Rate Watch: Pace of… Read More »Weekly economic and financial commentary

Whether or not to invest in Gold depends on your financial goals, risk tolerance, and trading strategy. However, many professionals recommend dedicating a part of your portfolio to Gold, as it can be a good investment given that it’s a tangible asset that retains its value over time. Additionally, it can serve as a hedge against inflation and is a safe haven in times of economic or political uncertainty. There are different ways to invest in Gold: you can buy physical or digital Gold, you can buy shares of Gold miners, you can also use ETF to be exposed to Gold or trade Gold over the short-term with financial derivatives like those offered by the regulated broker, ActivTrades: CFD or Contract For Difference. If you’re thinking about adding Gold to your portfolio, let’s have a look at what can influence the price of Gold in 2023. A price analysis of Gold Like most commodities, the price of an ounce of Gold reached a new high during the first quarter of 2022 with the war between Russia and Ukraine. However, prices of Gold traded downward from April until November, when it reached a yearly low of approximately $1,617, bringing the price… Read More »What will influence the value of Gold in 2023?

As we move into the second decade of the twentieth century, the world faces a set of risks that people have never seen or have forgotten their existence for decades, such as: High inflation with the rapidly increasing cost. Geopolitical confrontation with the spectre of nuclear war. Cyber Security, high tech risks. Environmental sustainability. Widespread social unrest with increasing polarity. The Risk of poly-crises. What is remarkable is that businessmen and policymakers of recent generations who have never experienced such risks are now being called upon to face them. In addition, in the next few years, it will be required from them to face a new era with: Lower economic growth. Lower global investment. Globalization being challenged. Human development diminishing. Climate change causes multiple risks. This is a new era where in addition the problem of unsustainable debt levels is very likely to re- emerge in sectors and countries around the world causing instability. All these risks are converging to shape the conditions for a decade likely to be dominated by uncertainty and turmoil. Let's examine some of the results of these risks in more detail: High cost of living This year and possibly next year, the most considerable risk… Read More »What are the major global risks to economies and markets?

The Fed pivot trade got another boost on Thursday, this after US CPI declined further in December. Traders are now fully embracing a 2023 Fed policy turnaround despite still higher core services inflation reads and strong employment numbers.

Good Morning! US CPI for Dec-22 came out lower at 6.42% (Y/Y%) from 7.12% seen in Nov-22. This lead to a sharp fall in the Dollar index, taking Euro higher towards 1.0850/09. EURUSD and USDJPY have fallen sharply along with weak Dollars and look bearish for the near term. Pound and Aussie have risen and may test 1.23 and 0.70 respectively. USDCNY has fallen below 6.75 and looks bearish towards 6.70/68 while USDRUB has broken below 68 which if sustains would open up chances for a further decline to 67. USDINR can fall to 81.25/81.00 while EURINR can trade in a ranged fashion while below 89. The US Treasury yields have declined sharply on a slowdown in the US inflation. The US Headline CPI (YoY) fell to 6.42% in December from 7.12% in November. The Treasury yields have limited room from here as strong supports are coming up that can trigger a reversal. The German yields have come closer to their key support and can see a fresh rise in the coming days. The 10Yr and 5Yr GoI can fall further in the near-term. Dow can see a test 34500 on the upside. DAX continues to rise and can advance… Read More »Morning Briefing: Euro higher towards 1.0850/09

There’s been a noticeable change in inflation tendencies since Covid hit. The key question is whether this represents another regime change. CPI and PCE inflation data from the BLS, chart by Mish.  Chart Notes The CPI is a measure of prices directly paid by consumers.  The PCE price index includes expenses paid on behalf of consumers, notably corporate-paid health insurance and Medicare.  Core inflation measures exclude food and energy. The PCE numbers are seasonally adjusted. The CPI numbers are unadjusted. The Great Moderation The great moderation is the term economists use for the regime change starting in 1983 after Fed chairman Paul Volcker allegedly broke the back of inflation by spiking interest rates to 20 percent.  Will High Inflation Persist? Autocorrelation Chart Pre-Great Moderation by St. Louis Fed Credit for this post idea goes to the St. Louis Fed writers Michael McCracken and Trần Khánh Ngân for their article Will High Inflation Persist? Even though inflation started to cool toward the end of 2022, it is still unclear how long it will take to return to its long-run average—that is, if currently high inflation will persist.  Each of the two figures plots the autocorrelation coefficients between year-over-year inflation (measured as the… Read More »How long will high inflation persist? What happened to the Great Moderation?

EUR/USD climbs to a fresh multi-month top and draws support from a combination of factors. The recent hawkish ECB rhetoric underpins the Euro and remains supportive amid a weaker USD. Bets for smaller Fed rate hikes continue to weigh on the buck ahead of the US CPI on Thursday. The EUR/USD pair remains well supported by a combination of factors and holds steady near its highest level since late May through the Asian session on Thursday. The recent hawkish rhetoric from several European Central Bank (ECB) policymakers continues to benefit the shared currency. This, along with the prevalent US Dollar selling bias, acts as a tailwind for the major. French central bank governor Francois Villeroy de Galhau said on Wednesday that interest rate hikes would need to be pragmatic in the coming months. Furthermore, ECB Governing Council member Olli Rehn said that several more significant rate hikes are required to restrict growth and dampen inflation. Separately, ECB policymaker Robert Holzmann noted that policy rates would have to rise significantly further to reach sufficiently restrictive levels to ensure a timely return of inflation to the 2% target. The Federal Reserve, on the other hand, is expected to soften its hawkish stance… Read More »EUR/USD Analysis: Bulls now await US CPI before positioning for further appreciating move

In his first public appearance of 2023, US Federal Reserve Chair Jerome Powell participated in a panel discussion (Central bank independence and the mandate – evolving views) on Tuesday and reiterated the Fed’s commitment to contain inflation. Powell added that ‘restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy’. However, comments on upcoming policy moves were minimal. Early trading on Wednesday saw Aussie retail sales jump in November as inflation surprised markets to the upside, climbing to 7.3% in the 12 months to November, up from 6.9%. The Reserve Bank of Australia will meet for the first time this year on 7 February, projected to increase the Cash Rate by 25 basis points. Today’s inflation data out of the US serves as the macro highlight for the week. The consensus heading into the event forecasts a 6th deceleration to 6.5% in the 12 months to December, with a forecast range spanning between a 6.8% high and a 6.3% low, down from 7.1% in November. Technical View for Key Markets EUR/USD Resistance in View As seen from the weekly timeframe, the late pullback… Read More »Technical market outlook ahead of US CPI data

Annual CPI in the US is forecast to decline to 6.5% in December. Markets remain optimistic about a policy pivot despite hawkish Fed commentary. EUR/USD and USD/JPY are likely to react significantly to inflation data.  The US Dollar Index has been moving in a downtrend since early October with investors anticipating a less aggressive policy tightening by the Fed in light of soft inflation readings. On Thursday, January 12, the US Bureau of Labor Statistics will release the Consumer Price Index (CPI) data for December. Investors expect the annual CPI to decline to 6.5% from 7.1% in November and see the Core CPI, which excludes volatile food and energy prices, edging lower to 5.7% from 6%. On a monthly basis, the CPI is forecast to stay unchanged while the Core CPI is projected to rise 0.3%. Following the December policy meeting, the US Federal Reserve’s revised Summary of Projections (SEP) showed that policymakers’ median view of the policy rate at end-2023 rose to 5.1% from 4.6% in September’s SEP. Currently, the CME Group FedWatch Tool shows that markets are pricing in a nearly 80% probability of the Fed raising its policy rate by 25 basis points to the range of… Read More »US December CPI Preview: EUR/USD and USD/JPY are pairs to watch

Join Senior Market Strategist & Trading Mentor Duncan Cooper as he watches price levels on the EURUSD weekly and daily charts.