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Is it the bottom?The graph shows the fall in wage income relative to the rise in prices. We see a rapid decline in the income of citizens. Perhaps this is the effect of the January holidays, because. salaries haven’t yet arrived at the bank and therefore the 3rd week of January is the most depressing. This trend was observed in the period 1979-1981, and it was the bottom of social sentiment. There is one difference - in the past it coincided with the bottom in the stock markets, now, in our opinion, we haven’t reached it. What conclusion can be drawn from these statistics?
FRED:LES1252881600Q
by Financial_Wave
NZ dollar steady after solid jobs reportThe New Zealand dollar is in positive territory on Wednesday, as the currency looks for its first winning session since April 20th. The New Zealand labour market remains robust, as confirmed by the Q1 employment report. The unemployment rate remained at a record low of 3.2%, matching expectations. Employment growth fell to 2.9%, (3.1% exp.), which was down from the 3.5% gain in Q1. What was perhaps more significant was wage growth, which climbed to 3.1% YoY, its highest level since 2008. The RBNZ places great weight on wage growth and this upswing will raise pressure on the central bank to deliver another 0.50% rate hike at the May 25th meeting, which would bring the Official Cash Rate to 2.0%. Inflation hit 6.9% in the first quarter and the RBNZ is determined to curb inflation expectations, which like CPI, continues to accelerate. The RBNZ delivered a 0.50% in April and has telegraphed the markets that more tightening is needed. Despite the RBNZ's hawkish stance, the New Zealand dollar has been steamrolled by its US cousin. NZD/USD plunged 6.88% in the month of April, even with the 0.50% rate hike in April. The Fed holds its policy meeting later today, with a 0.50% rate increase a virtual certainty. Such a move will be highly significant, as it would mark the Fed's largest rate increase in 20 years and demonstrates that the Fed is committed to reducing inflation, which has hit 40-year highs. The half-point increase has been priced in, but what remains uncertain is the tone of the rate statement and how aggressively will the Fed scale back its balance sheet (quantitative tightening). If the Fed delivers a hawkish message to the markets in addition to the rate hike, the US dollar will likely respond with gains. There is support at 0.6391 and 0.6325 We find resistance at 0.6519 and 0.6585
by OANDA
Aussie stable ahead of RBA decisionIt was another tough week for the Australian dollar, as AUD/USD fell 2.53%. In the European session, AUD/USD is trading quietly at 0.7046. The RBA will be in the spotlight, as it holds its policy meeting on Tuesday. This meeting is live, as it's unclear what policy makers have planned. There's little doubt that the RBA is poised to embark on a rate-hike cycle, keeping in sync with the Federal Reserve and other major central banks. The uncertainty lies in whether the Bank will raise now, and if so, by how much. Inflation continues to spiral, hitting 5.1% in the first quarter. RBA Governor Lowe has long insisted that he would not raise rates until wage growth rose in order to ensure that inflation was not transitory. Well, wage growth is accelerating and nobody is using the T-word when describing inflation. With a robust labour market, the conditions are right for changing gears and moving away from the bank's loose monetary policy. A rate hike of 0.40% would be called for, but there is the issue of the federal election later this month. The RBA does not want to deliver an oversize rate hike in the middle of an election campaign, but at the same time needs to send a message to the markets that it is determined to contain inflation - standing on the sidelines would risk credibility. The compromise (which is the consensus) is that the RBA will raise rates, but only by 0.15%, with a further hike at the June meeting. A small hike will not send inflation on its heels by any stretch, but will send a slightly hawkish message, as this would be the first rate hike since 2011. With the Federal Reserve widely expected to raise rates by a half-point at its meeting on Wednesday, the Aussie could find itself under pressure this week, as it struggles to remain above the symbolic 0.70-line. There is support at 0.6992 and 0.6923 AUD/USD has resistance at 0.7125 and 0.7194
by OANDA
Inflation Will Recede If Oil Price Drops Chart to illustrate the oil prices as a leading indicator of month over month inflation rates. Inflation statistics mirror oil price action with a lag of about 1-2 months. "Federal Reserve Chair Jerome Powell said in his semiannual testimony before the U.S. Senate Banking Committee in March 2022 that, as a rule of thumb, every $10 per barrel increase in the price of crude oil raises inflation by 0.2% and sets back economic growth 0.1%." If he's right, which he appears to be, we should see inflation month over month drop by .2% when we get the stats on May 11th. That would take us down to 8.3%. Headed in the right direction, but not fast enough. Depending on what the Fed does this week and if oil prices have peaked and are rolling over, we might see more of a reprieve from inflation starting in June. If it isn't enough, the Fed will have to raise rates by at least 50 basis points again. This may be why Powell is suggesting there will be two 50 basis point jumps in May and June as "frontloading" the hikes and will slow down after. That's probably the case because high inflation is about to whipsaw into a big recession (as is common after oil peaks and rolls over, historically speaking).
ECONOMICS:USIRMM
by stockpreacherman
CDN slips on Fed, Canadian Retail Sales data aheadThe Canadian dollar is considerably lower in the Thursday session. Currently, USD/CAD is trading at 1.2474, up 0.56% on the day. Canada releases Retail Sales for January on Friday (12:30 GMT), with the street consensus pointing to declines. Headline retail sales is expected at -3.0%, while Core Retail Sales is projected at -2.8%. Both indicators registered declines in December, so a repeat would indicate a slump in consumer spending. That could sour investors on the Canadian dollar, which has sparkled in March, with gains of 2.1 per cent. The US dollar has made gains on Thursday, courtesy of a rise in US 10-year Treasury bonds. The Federal Reserve meeting on Wednesday did not contain any surprises, as policymakers left monetary policy unchanged and reaffirmed its accommodative monetary policy. The Fed's dot plot was more dovish than expected, with most FOMC members not anticipating a rate hike prior to 2024. At the same time, the Fed's economic outlooks were upbeat, with the growth forecast upwardly revised to 6.5% this year, compared to 4.3% beforehand. Inflation is expected to rise to 2.4% in 2021, but Fed Chair Powell noted that he expected this rise to be a temporary spike that would not affect the Fed's commitment to maintain interest rates at ultra-low levels. The US dollar has not had much trouble weathering the FOMC meeting, despite Powell's pledge to stick with a very dovish monetary policy. On Thursday, the greenback is in positive territory against its major rivals, with higher 10-year Treasury yields providing a boost to the currency.
by OANDA
No matter how tempting it is to Long EU....but there isn't strong enough rationale for my liking, to start shifting my entire bias even to a cautious bullish (meaning taking Long signals but with an extremely small position). The federal reserve did cut their interest rates but I still believe there is still a divergent monetary policy between ECB and Federal Reserve. ECB is in QE, Fed Reserve is not. ECB interest rate is lower than the Fed Reserve. Technically, though there is indeed a sign that price probably could start going up, but I have seen this kind of move before only the support levels to be broken. I am at least shifting my bias from strong bearish EURUSD into weak bearish EURUSD (meaning I will take short trades with half of my usual risk per trade). I will look for bull traps/liquidity pool tapping at the levels I have marked on the chart. There is no risk event for the U.S and Eurozone for Monday
by sufiansaid
Key things to know before NFP releaseThere is an increase in low-paid jobs and a demand for low-skilled workers, hence their replacement is high, which is a deterrent to wage growth, and hence inflationary pressure. Employment growth in the sectors where higher qualification is required will be the first shift from the dead-end, where it can be said that employment will give impetus to the growth of salaries. So far, the sphere of health care and professional services is providing hope. Unemployment is a lagging indicator, therefore, due to inertia, the employment passing peak may hide the change in the economic trend due to worsening expectations. The deformation of the labor market in the retail sector is due to the introduction of Amazon innovations aimed at reducing the sector's dependence on manual labor. A factor that globally affects employment and can set undesirable trends in the future. There are hopes that the growth of salaries is lagging behind and will take a course to climb several months after reaching the key unemployment level (4.6% according to the Fed). Employment of the population is closely linked to a sense of stability and confidence in the future, which is well reflected in the consumer sentiment index. However, it should be noted that the contraction of the labor market, i.e. layoffs occur as a reaction of firms to falling consumer demand, so the deterioration in consumer sentiment usually precedes the growth of unemployment. History perfectly confirms this relationship (check out our blog for respective chart) While consumer expectations are at a high level, about 100 points over the past few months, indicate strong demand, job growth is expected to stay sufficient to maintain unemployment at current levels or even lower. As noted before, the Fed will still try to determine the "boiling point" where unemployment and inflation will again enter a stable correlation, before explaining their position on the third rate hike. During the European session, the dollar index declined slightly and meets the NFP relatively calm. Risk appetite has risen sharply, as evidenced by emerging market currencies, as well as Asian and European stock markets in the growth zone. Oil went into decline, while the spread between WTI and Brent continues to grow. Gold went into growth as some investors decided to reinsure themselves before the release of the key indicator in the US. Arthur Idiatulin
Short
by Tickmill
Opportunity for SHORT Trades within this Lower High!!Recently we have seen FX:USDJPY reverse from the Major Resistance Level @ 114.000 with Sellers taking back over bringing price straight back down from the Bullish run we had experienced. This pair has been creating some really nice structure in this current Downtrend with a series of Lower Low & Lower Highs. I believe there is now opportunity to start selling this pair to see if we can encounter some new lows. I do believe if we carry on creating structure with sellers remaining dominant we could see the next major support level of 109.000 being achieved. We do have Interest Rate decisions tomorrow from the Federal Reserve with Interest Rates Forecasted to remain the same @ 1.25%, so we will see how the markets will react to this data release.
Short
by LewisDawes