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Inflation

Analyzing Inflation: COVID-19, Energy, Conflict & LaborInflation, a critical financial and economic indicator, has been significantly impacted by various factors in recent years. This article delves into the influence of COVID-19, changes in work patterns, labor market shifts, energy sector decisions, and the Russia-Ukraine war on inflation, presenting a comprehensive analysis of our present financial landscape. COVID-19 and Supply Chains: A Recipe for Inflation The global pandemic, COVID-19, significantly disrupted supply chains worldwide. With a combination of limited supply and robust or surging demand, the result was inevitable - a price increase, a key driver of inflation. Rising costs of materials, labor, energy, and transportation, all amplified by the pandemic, made goods more expensive to manufacture and transport, further contributing to inflation. The aftermath of these disruptions led to a ripple effect: a rise in supply chain costs. Consumers facing higher prices found themselves with reduced disposable income, which could, in theory, lower demand. However, the essential nature of many goods affected by these disruptions likely negated this potential offset, fueling inflation further. In the long run, these disruptions could lead to persistent inflation. The pandemic has exposed the fragility of 'just-in-time' inventories and the impact of underinvestment in global commodity supply chains, adding to inflationary pressures. Consequently, inflation may become a more permanent fixture, disrupting business planning and forecasting and adding another layer of complexity to the economic environment. Labor Market Shifts: From Crisis to Recovery The pandemic has considerably affected the labor market, resulting in significant shifts and shortages across various sectors. The initial outbreak led to severe job losses, with the global unemployment rate peaking at 13%. However, as economies start to reopen, we're seeing an interesting trend: people voluntarily leave their roles, even as worker demand increases. This labor shortage, induced by changing demographics, border controls, immigration limits, and the call for better pay and flexible work arrangements, presents another challenge in our economic landscape. Furthermore, the acceleration of digitalization and the gig economy could have enduring effects on labor supply and productivity. The crisis has potentially long-term implications, like automation's role in slowing the employment recovery in service occupations. Remote Work: A Double-Edged Sword The rise of remote work, while offering significant societal and economic benefits, also carries potential inflationary effects. Increased demand for houses/apartments, home office equipment, utilities, and other home-centric products and services has led to price hikes, accelerating inflation. Moreover, while remote work has the potential to boost productivity and create new job opportunities, it also brings challenges. Difficulties in collaboration, communication hurdles, and blurred work-life boundaries could negatively impact productivity, painting a more complex picture of remote work's overall effect on productivity and inflation. Energy Decisions: A Balancing Act The decision to reduce investments in nuclear energy and fossil fuels can influence inflation and the overall energy market. A decline in energy production can lead to price increases due to supply-demand imbalances, contributing to inflation. Moreover, reduced domestic energy production may increase dependence on imported energy, which, if more expensive or if international energy prices rise, could also lead to inflation. Transitioning to green energy without adequate investment and planning could lead to shortages and disruptions, driving up energy prices and contributing to inflation. While renewable energy technologies are advancing rapidly, they cannot fully replace the capacity provided by nuclear and fossil fuels in many countries. This could lead to energy shortages and price increases, particularly if the transition to green energy outpaces the technology's readiness. The variability of renewable energy sources, such as wind and solar, presents another challenge. Without adequate energy storage and grid infrastructure investment to manage this variability, energy supply disruptions and price spikes could become more common. Moreover, a rapid transition to green energy could displace existing energy jobs before adequate green energy jobs are created. This could lead to economic instability and potentially contribute to inflation. While the long-term costs of renewable energy can be lower than fossil fuels, the initial investment required to build renewable energy infrastructure can be high. Higher energy prices can pass these costs to consumers, contributing to inflation. In conclusion, while the transition to green energy is crucial for addressing climate change, this transition must be well-planned and well-managed. Policymakers must strike a careful balance between the urgency of climate action and the need to maintain energy security and economic stability. The Russia-Ukraine War: Geopolitical Inflation The ongoing conflict between Russia and Ukraine has also played a role in driving inflation. The war has disrupted the supply of essential commodities such as oil, gas, metals, wheat, and corn, pushing their prices upwards. These nations are major suppliers of these commodities, and their reduced supplies have led to sharp price increases worldwide. Furthermore, the conflict has exacerbated global supply chain disruptions, already strained by the COVID-19 pandemic. This has led to heightened inflationary expectations among businesses and consumers. Additionally, the war has significantly increased oil and gas prices, particularly in Europe, directly impacting inflation and household spending. The war has also weakened global economic confidence, further fueling inflationary pressures. Countries already grappling with financial challenges, such as Lebanon and Zimbabwe, have been severely impacted by the inflationary effects of the Russia-Ukraine war. Overall, the conflict is estimated to add about 2% to global inflation in 2022 and 1% in 2023, compared to pre-war forecasts. Conclusion In conclusion, the dynamic interplay of the COVID-19 pandemic, remote work, labor market shifts, energy sector decisions, and the Russia-Ukraine war has significantly influenced inflation. Policymakers, economists, and businesses must navigate this complex landscape to develop effective strategies that mitigate inflationary pressures while promoting sustainable economic growth. As we move forward, we must continue to monitor these factors to understand their ongoing effects on inflation and the broader economy.
TVC:US10Y
by BitcoinMacro
Swing long GBPUSDHello everyone, My system tells me to swing long GBP towards 1.3 area. With inflation picking up in UK the path of least resistance is up. The fed is cornered and i dont think that any type of hike will help them today. I am expecting 25bps, markets will buy usd and then a dovish speech from powell. If they pause it will be the same. Only if they cut i think that will cause some massive panic and everything will sell off but this is a far fetched idea. Stay safe and cheers!
Long
by Inorogu
2
Long GBPJPY ideaAs we have UK CPI on Wednesday this long could be just an intra-day punt. Looking for a drop down into the imbalance and then a sweep of the recent swing high. There is a double bottom just below the entry hence why I am not really bullish. The news could be used to sweep those lows and maybe a pushed further down. Going to stay nimble. The USDJPY held up today, while the EURJPY and GBPJPY made an attempt to drop. IF we get direction in the UJ I'll use that as my lead for how much to bet on the GJ
Long
by Macrobriefing
USD/JPY - Yen eyes Tokyo CPI, US GDPUSD/JPY is trading quietly at 133.84, up 0.13% on the day. The yen's lack of movement could change today with a host of key releases. Japan will release Tokyo Core CPI, while the US publishes Preliminary GDP for the first quarter and unemployment claims. Japan releases Tokyo Core CPI for April early on Friday, which is expected to remain steady at 3.2%. Will BoJ meeting bring more of the same? Japan's inflation is running around 3%, a dream for most central banks but a headache for the Bank of Japan. There has been pressure on the BoJ to tighten policy as inflation remains above the target of 2%. Japan has experienced decades of deflation and the massive stimulus programme was meant to stimulate the economy. Inflation has moved higher, but former BoJ Governor Kuroda insisted that the central bank would not consider tightening until it was convinced that inflation was sustainable, which required stronger wage growth. New BoJ Governor Ueda has toed the party line so far, but left open the possibility of tightening if wage growth and inflation climb faster than expected. All signs point to the BoJ maintaining its policy settings when it wraps up its 2-day meeting on Friday, but the central bank has surprised the markets in a big way before, and the markets will be following the meeting closely. In the US, unemployment claims have moved higher for four straight weeks and come in above the estimate each time. The upward trend is expected to continue, with claims expected to rise to 248,000, up from 245,000. The labor market remains strong, but the upswing could signal cracks in what has been a robust US labour market. Preliminary GDP for the fourth quarter is expected to drop to 2.0% y/y, down from 2.6% in Q4. USD/JPY tested support at 133.41 earlier in the day. The next support line is 132.69 134.27 and 134.99 are the next resistance lines
by OANDA
EUR/USD's hidden clues & key levels? Here’s an interesting chart: the inflation differential of the US and the EU plotted against the EUR/USD pair. If we approximate the range of the inflation differential with an upper bound of 1.5 and a lower bound of -0.5, we get a compelling signal for trading the EUR/USD pair. Buying EUR/USD when the inflation differential bottoms has resulted in success 4 out of the 5 times this signal was triggered. Repeating the analysis using the preferred inflation measures for both central banks – PCE for the Federal Reserve (Fed) and EU HICP for the European Central Bank (ECB) – yields similar results. Is this spurious correlation or is there more to this? Our guess is that the inflation differential drives expectations of one central bank’s move versus the other which affects the currency pair. The upcoming US PCE release on 28th April will provide insight into whether the inflation differential between the US and EU will continue to narrow. The validity of this data remains to be seen, but it's certainly an intriguing observation to consider! The rather eventful economic calendar over the next two weeks offers opportunities for this pair. Starting with the PCE Price Index released on April 28th, it is followed by the Fed meeting on Wednesday, May 3rd and the ECB meeting on Thursday, May 4th. With these events in mind, we want to position ourselves for the flurry of announcements coming out, which could play into EUR/USD strength. The long-term price action still seems to point towards an uptrend, with the 100-day Simple Moving Average (SMA) crossing the 200-day SMA and clearly marking previous swings. The current price is also consolidating at the 1.1000 psychological level, with parity and 1.2000 levels roughly marking the EUR/USD range for the decade. Zooming in, the EURUSD has been trading in an uptrend. An attempt to break above the 1.11 level was quickly rejected, with prices trading back to the trend support shortly after. We are currently witnessing another attempt to break this same level once again. Hence, a risk-managed trade could yield opportunities here with the upcoming onslaught of announcements. Setting up a long position at the current level of 1.1074 with a tight stop just below the trend support at 1.0945 and take profit level of 1.1400 would give us a risk-reward ratio of roughly 2.5. Each 0.00005 increment per EUR in the EURUSD futures contract equal to 6.25$. The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description. Reference: www.cmegroup.com
CME:6E1!Long
by inspirante
AUD/USD slips to 2-week low ahead of CPIThe Australian dollar has plunged on Tuesday. AUD/USD is trading at 0.6632, down 0.95% on the day. The Aussie is under strong downward pressure, having lost around 1.7% since Thursday. Australia releases inflation on a quarterly basis, which magnifies the impact of the release. Inflation has been falling and this trend is expected to continue in the Wednesday release of first-quarter CPI. The headline figure is expected to fall from 7.8% to 6.9% y/y and from 1.9% to 1.3% q/q. The core rate, which is considered a more reliable gauge, is likewise expected to fall - from 6.9% to 6.7% y/y and from 1.7% to 1.4% q/q. Investors will be mindful that headline inflation surprised on the upside in Q4, rising from 7.3% to 7.8%. The two monthly inflation reports since the Q4 release in January, however, indicated that inflation was back on its way down, with headline CPI falling from 7.4% to 6.8% and beating expectations. The RBA would love to pause rates at 3.60% for a second straight month, and another drop in inflation would strongly support a pause at the May 2nd meeting. As well, another deceleration would be a strong indication that inflation has peaked, although the battle is far from over as it will take a long time to achieve the 2% target. The likelihood of another pause in rates stands at 83%, according to the RBA Rate Tracker. In the US, today's data has been a mixed bag. UoM Consumer Sentiment for April was expected to remain unchanged at 104.0, but surprised on the downside, falling to 101.3. There was better news from New Home Sales, which soared 9.6% in March, rebounding from -3.9% in February and crushing the estimate of 1.1%. There is resistance at 0.6751 and 0.6808 AUD/USD is testing support at 0.6657. Next, there is support at 0.6572
by OANDA
Inverted Yield Curve Starts in 2023 - Explained When the yield of the 3-month bond is higher than the 30-year bond yield, this is known as an inverted yield curve. It is a rare and unusual occurrence and we are seeing this today. This signals a potential economic recession in the future. An inverted yield curve suggests that investors have a pessimistic outlook for the future of the economy. They are willing to accept lower yields on long-term bonds because they anticipate a slowdown in economic growth. In contrast, they demand higher yields on short-term bonds because they expect the central bank to raise interest rates in response to inflationary pressures. An inverted yield curve can lead to a decrease in borrowing and lending activity, as it can make it more expensive for businesses and consumers to borrow money. This can result in a reduction in economic growth and can eventually lead to a recession. Some reference for traders: Micro Treasury Yields & Its Minimum Fluctuation Micro 2-Year Yield Futures Ticker: 2YY 0.001 Index points (1/10th basis point per annum) = $1.00 Micro 5-Year Yield Futures Ticker: 5YY 0.001 Index points (1/10th basis point per annum) = $1.00 Micro 10-Year Yield Futures Ticker: 10Y 0.001 Index points (1/10th basis point per annum) = $1.00 Micro 30-Year Yield Futures Ticker: 30Y 0.001 Index points (1/10th basis point per annum) = $1.00 Disclaimer: • What presented here is not a recommendation, please consult your licensed broker. • Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises. CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
CBOT_MINI:30Y1!Long
by konhow
USD/JPY extends rally ahead of BOJ Core CPIThis week's data calendar out of Japan will be dominated by inflation releases and the Bank of Japan's two-day meeting at the end of the week. Traders will be keeping a close eye on BoJ Core CPI, which will be released on Tuesday. The index, which is the BoJ's preferred inflation gauge, fell from 3.1% to 2.7% in February. Another drop would support the central bank's view that inflation is falling back towards the 2% target. Inflation has been running above 3% and this has raised speculation that the BoJ will respond by tightening policy, which would likely send the yen sharply higher. The BoJ has insisted that it will not tighten until it is convinced that higher inflation is sustainable and not a result of more expensive goods and raw materials. The uncertain outlook for global growth and a weak domestic economy means that the BoJ is in no rush to shift policy. New Governor Ueda has been consistent in his message that he will maintain an ultra-loose policy, but nonetheless, speculation continues that the BoJ will tweak or even abandon its yield curve control, which has been criticised for distorting bond market pricing. I suspect that speculators hoping for a shift in policy that will send the yen higher will be disappointed after this week's meeting, as Ueda is unlikely to rock the boat at his first meeting. The BoJ will provide updated quarterly growth and inflation forecasts, which could provide a hint as to future monetary policy. USD/JPY is testing resistance at 1.3427. Next, there is resistance at 1.3499 133.41 and 1.3269 are providing support
by OANDA
Destablising Inflation Concerns Weigh on the GBP In March 2023, the United Kingdom's year-on-year consumer price inflation rate decreased to 10.1% from 10.4% in February. However, it exceeded the market forecast of 9.8%, and Britain remains the country in Western Europe with the highest rate of inflation. This also marks the seventh consecutive period where the rate has remained above 10% and has been above the Bank of England's 2% target for nearly two years. Consequently, policymakers will have to consider raising borrowing costs more than previously expected. Deutsche Bank has increased their projections for UK rates by anticipating two additional 25 basis point rate hikes from the Bank of England. Meanwhile, Morgan Stanley forecasts a single rate hike, but there is a possibility of a second one. British finance minister Jeremy Hunt said on Wednesday that "When inflation is above 10%, it is destabilising for the economy. It is not a good place to be, ultimately it is dangerous if you leave it there,". The seesawing in the GBP in reaction to this inflation data drop has perfectly encapsulated these projections for more rate hikes and fears for a destabilised economy. Still, the GBP/USD has been able to fend off a position below 1.24000 and is currently testing the fortitude of 1.24352 as a support. Upside potential could be limited by resistance at 1.24494 and 1.24738 considering that the market has likely already priced in a 25-basis-points hike at the Bank of England’s next meeting on May 11.
by BlackBull_Markets
GBP/USD edges higher as UK inflation higher than expectedUK inflation remains hot and stubbornly high. In March, headline CPI dropped to 10.1%, down from 10.4% but above the consensus estimate of 9.8%. Inflation is still stuck in double digits, but the silver lining is that inflation has resumed its downswing after unexpectedly rising in February from 10.4% to 10.1%. The core rate remained unchanged at 6.2%, above the estimate of 6.0%. The usual suspects were at play in the headline release, as food and energy costs continue to drive inflationary pressures. It hasn't been the best of weeks for the Bank of England. The employment report showed that wage growth remains high and inflation is galloping at a double-digit pace. The BoE has raised rates to 4.25%, but the battle against inflation has been difficult, and it's unclear if inflation has even peaked. The latest wage and inflation numbers have likely cemented another rate hike at the May meeting, but that's not good news for a struggling economy. GDP in February was flat, as widespread strikes and the cost-of-living crisis dampened economic activity. Consumers are struggling with higher taxes, hot inflation and rising interest rates. Inflation remains the central bank's number one priority and a pause in rates will isn't likely until the tight labour market, which is causing higher wage growth, cools down. In the US, there are no tier-1 events on the calendar. Investors will be focussing on Fedspeak, with Fed members Williams, Goolsbee and Mann making public statements. Earlier this week, Williams said that he expects inflation to continue falling and to reach 3.75% by the end of this year and hit the 2% target by 2025. GBP/USD is testing resistance at 1.2436. The next resistance line is 1.2526 There is support at 1.2325 and 1.2235
by OANDA
GBPJPY Technical Analysis 19.04.2023 1h chart– Previous Daily candle closed Bullish at 166.530 breaking above the previous Weekly High. – Buys on close above 166.900 targeting 30min Resistance formed on 16th December 2022 at 167.230, Leaving Runners to the Daily previous Support formed on 14th December 2022 at 167.660. – Sells on close below 166.450 targeting 4h Support at 166.240, Leaving Runners to the Daily Support formed at 165.930. – High Impact News data ahead for the Pound Sterling at Pre London for the CPI y/y forecasting 9.8% / Previously was 10.4%, High Volatility expected at the London Open.
by SalimFX20
GBP/USD - Pound rebounds as wage growth remains high, CPI expectThe UK employment report for March was a mixed bag. The number of unemployed persons jumped by 28,200, after a decline of 18,000 in February and higher than the estimate of -11,800. The unemployment rate nudged higher from 3.7% to 3.8%. These numbers, which point to a slight weakening in the labour market, were overshadowed by a jump in wage growth. Average earnings excluding bonuses hit 6.6% y/y in the three months through February, versus the revised upwards January read of 6.6% and the estimate of 6.2%. Wage growth remains stubbornly high, despite the Bank of England's steep tightening and that has to be a key concern for Bailey & Company. As wages continue to accelerate, the concern of a wages/price spiral remains very real and supports another rate hike at the May meeting. Inflation rose in February to 10.4%, up from 10.1%, and Wednesday's inflation report will be a crucial report card for the BoE. If inflation doesn't fall below 10% (the forecast stands at 9.8%), it's hard to see how the BoE can ease up on its relentless rate hikes. The wage growth numbers were enough for Goldman Sachs to upwardly revise its rate expectations for May from a hold to a 25 basis-point hike. The UK's uncertain economic landscape has become cloudier as hundreds of thousands of public sector workers are striking or planning to strike due to wage concerns. Workers have seen their real income fall as inflation has been at double-digit levels. The government has called for wage restraint in its battle to curb inflation, but strikers won't be in the mood to compromise as long as wages fail to keep pace with inflation. GBP/USD tested resistance at 1.2436 earlier in the day. The next resistance line is 1.2526 There is support at 1.2325 and 1.2235
by OANDA
Strong Banks / Point of inflection for the Markets Bank Earnings have been great! Though, The market wasn’t overly thrilled about it. We believe this is due in part to the uncertainty it caused regarding the fed rate path. The bank failure(s) that occurred, and fear of continued failures, cast doubt on the feds ability to continue to raise rates. This elevated markets, in our opinion, in conjunction with favorable inflation and NFP reports showing a cooling economy.… then the bank earnings arrived snd acted as a headwind to the indexes. What we think is important to watch for: 1) ES1! 4200 This region has been a repeated battleground for Price action. and a close above it .. or failure at it, would be a good indicator for midterm direction. 2) FED comments on the banks earnings Overall bullish on the market- but I do think we may range for a bit longer. 3) XLF may yield sustained alpha
CME_MINI:ES1!
by WillNixTrading