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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
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
USD/JPY jumps after solid nonfarm payrolls releaseUSD/JPY has posted gains in the North American session after a solid showing from US nonfarm payrolls. Japan's real wages continued to fall, while household spending rebounded. In the North American session, USD/JPY is trading at 132.24, up 0.36% on the day. In the US, nonfarm payrolls was within expectations, easing concerns that the US labour market is in trouble. The economy added 236,000 in March, close to the market consensus of 240,000. This was a solid reading, although weaker than the February reading of 311,000. The US dollar posted gains against the majors after the release, after concerns that a soft reading might force the Fed to take a pause in its rate hikes. Japan's real wages fell in February for the 11th straight month, falling by 2.6%. Household purchasing power continues to drop, but this was an improvement over the -4.6% release in January, as government energy subsidies helped curb inflation. Household spending rose 1.6% in February, rebounding from -0.3% in January but well off the market consensus of 4.3%. The Bank of Japan doesn't meet until April 28th, but Governor Ueda will be under the magnifying glass, as he chairs his first meeting at the helm of the central bank. The economy is showing signs of improvement, with retail sales and industrial production accelerating in February. Inflation remains very low compared to other major economies but is still high for Japan. In February, CPI fell to 3.3%, down from 4.3% in January but above the BoJ target of 2%. There has been considerable speculation that Ueda could shift policy and tweak or even abandon the Bank's yield curve control policy. This move could have huge significance for the yen - when the BoJ widened the yield target band in December, the yen posted sharp gains. Ueda hasn't revealed any cards about what he might do at his first meeting. He has toed the line of the previous Governor, Haruhiko Kuroda, that the BoJ won't tighten until inflation is sustainable, and that would require higher wage growth. Wage growth has been falling, so any tightening moves such as raising interest rates do not appear imminent. USD/JPY is testing resistance at 132.27. Above, there is resistance at 133.45 130.94 and 129.09 are providing support
by OANDA
Pound in holding pattern ahead of Fed, BOEIt has been a quiet week for the British pound, but that could change in a hurry, with the Fed announcing its rate decision later today, followed by the Bank of England on Thursday. It's a virtual guarantee that the Federal Reserve will raise rates at today's meeting by 25 basis points. This would bring the benchmark rate to 4.75%. The Fed has had some success bringing down inflation, which fell to 6.5% in December. Inflation has de-accelerated for six straight months, which certainly sounds like it has peaked. Still, the Fed won't be using the "P" word anytime soon for fear of an excessive reaction from the markets. The markets are counting on a dovish pivot from the Fed, given the increasing signs that the US economy is slowing down. Will the Fed stick to its hawkish stance at the meeting, or will it present a more dovish stance? If the Fed signals that there are no plans to pivot, the US dollar should gain ground. Conversely, any hints about an easing in policy, such as a cut in rates later this year, would raise risk appetite and weigh on the dollar. The Bank of England follows the Fed with its own rate announcement on Thursday. The central bank is widely expected to raise rates by 50 basis points, which would bring the cash rate to 4.0% and would mark a 10th straight rate increase. Given the weak economy and sharp drop in housing prices, there is an outside chance of a modest 25-basis point hike. Despite the steep tightening cycle, inflation is running at a sky-high 10.5%, so the BoE is in no position to talk about a pause in rate hikes without inflation heading lower. Wage growth is becoming a major concern for the BoE, and today's massive strike by public servants for better pay won't help matters. Wages haven't kept up with soaring inflation, which is why we're seeing disgruntled workers go on strike, but wage growth is close to a record pace and is a major factor behind inflation which is still in double digits. GBP/USD is putting pressure on support at 1.2289. Next, there is support at 1.2203 There is resistance at 1.2369 and 1.2474
by OANDA
Yen's gains look cappedThe end of an era The global stock of bonds yielding sub-zero yields has been erased at the start of 2023, after peaking at US$18.4Trn in late 20201. The fight over inflation has caused central banks from the US, Europe, UK and across the world to exit their low to negative interest rate policy. Even the Bank of Japan – the world’s last dovish monetary authority- has left the sub-zero club and is inching towards normalisation. BOJ policy shift The Bank of Japan (BOJ) unexpectedly widened its target range for the 10-year Japanese Government Bond yields (JGB) from ±25Bps to ±50Bps at its December 20th meeting. Since then, the surge in 10-year JGB yields has caused a sharp rise of additional fixed rate and fixed amount purchases by the BOJ amounting to ¥17Trn. Market participants are speculating that BOJ will be forced to tighten policy even more in 2023. Political pressure alongside costly intervention forced the BOJ to tweak policy In 2022 – despite the BOJ keeping the Japanese 0–10-year curve fixed, sharply rising yields globally led the Yen to depreciate to a 24-year low, thereby stimulating Japanese net exports. This placed direct upward pressure on Japanese inflation via higher import prices. Japan was no longer able to sustain its yield curve control policy against a backdrop of ever-rising global yields because the interventions it needed to make in its government bond markets to defend the rise in JGB yields were becoming too costly. In addition, pressure from the Kishida administration due to concern about Yen’s depreciation pushing up prices and inflicting further damage on cabinet approval ratings. Yen gains look capped as policy framework likely to be maintained for longer The change in policy prompted the yen to appreciate to ¥130 versus the US dollar, a level last seen in early August. The Yen’s current rally marks a sharp turnaround from last year where investors were shorting the yen owing to the widening interest rate gap between the US and Japan. As illustrated below, an unwind -63%2 in net speculative short positioning helped drive the appreciation in the Yen towards the end of the year. If the BOJ were to make additional adjustments, it could spur further Yen appreciation. However, we feel the BOJ probably wants to keep its modified framework in place for a longer time frame, especially now that Yen versus USD stands at more comfortable levels. This was evident from its announcement of expansion of JGB purchases to ensure yields stay in the new range. Signs that current inflation isn’t sustainable The more concerning reason is wages are failing to keep up with inflation. In November, inflation adjusted pay slide 3.8% which was far worse than October’s 1.2% drop, marking the worst reading in 8 years3. 2023 wage growth depends largely on the results of annual spring negotiations between corporate management and labour unions. We expect bigger raises in base pay this year than in 2022, however its likely to keep up with inflation as the global economy slows. Japanese economy could avoid a recession in 2023 Japan’s inflation is likely to remain low in 2023, resulting in less need to tighten policy further. Japan is likely to avoid a recession in 2023. As it has yet to benefit from the re-opening trade that the Western economies have witnessed over the last two years. Consumption is likely to benefit from the economic re-opening and capex intentions are likely to rise on the back of pent-up demand for goods and services. While goods exports could soften due to the global economic slowdown, services exports are poised to steadily improve throughout the year, led by inbound spending following the lifting of border controls by the Japanese government in October 2022. The government also launched a new economic stimulus package in October to tame inflation and cushion the blow from rising raw material prices which should support the economic recovery in 2023. Factors underpinning the resilience in Japanese equity market performance In the face of the global equity market turmoil in 2022, Japanese equities4 performance has been fairly resilient (-11% versus -20%5 for global equities). Japan generates a large portion (nearly 52.7%6) of its revenues from global markets. So, a weaker Yen supported its profit outlook thereby making Japanese exporters more competitive than global peers. In 2022, a number of companies announced increased dividend pay-out ratios as well as share buybacks, with the intention of protecting shareholder returns amidst the global market volatility. Pay-out ratios rose to 63% from 40%7 at the start of 2022.
CME:6J1!
by aneekaguptaWTE
USD/JPY extends losses after BOJ SummaryThe Japanese yen continues to lose ground this week and is in negative territory on Wednesday. In the European session, USD/JPY is trading at 134.11, up 0.49%. Post-Christmas holiday trading remains thin, but USD/JPY has made steady gains and climbed 1% this week. The US dollar has recovered somewhat after last Tuesday's slide when it fell a staggering 3.8% after the BoJ widened its yield curve band. The move blindsided the markets, which had not expected any major policy moves prior to the end of Governor Kuroda's term in April. Investors were all ears as the BoJ released today the summary of opinions from last week's dramatic meeting. The summary of opinions showed that several of the nine board members said that the tweak to yield control was aimed at enhancing the current stimulus programme rather than ending it. This reiterated what Governor Kuroda stated in a press conference after the meeting. Still, speculation remains high that the BoJ could take further steps that tighten policy, and even exit the Bank's ultra-loose policy, especially with inflation running at a 40-year high. The summary of opinions indicated that members discussed rising inflation and the possibility that higher wages would remove the risk of a return to deflation. The BoJ has been focused on wages, arguing that strong wage growth will ensure that inflation is sustainable, as opposed to inflation that is driven by higher costs for energy and raw materials. The government is also making wages a top priority, and there are indications that major companies and labour unions will negotiate higher wages in the spring. If the BoJ sees that wages are rising it could raise its yield curve control target, which is currently around 0% for 10-year bonds. The BoJ will likely be back in the headlines shortly, with its next meeting on Jan. 17th and 18th. USD/JPY is testing resistance at 134.12. Above, there is resistance at 134.82 There is support at 133.25 and 132.29
by OANDA
Pound rises even as inflation tops 11%The British pound has moved higher on Wednesday. In the European session, GBP/USD is trading at 1.1934, up 0.56%. The pound roared on Tuesday, gaining close to 1% and punching past the 1.20 line for the first time in three months. It has been a busy time for sterling, which has been marked by sharp swings that would make an exotic currency blush. The pound's volatility has been especially pronounced in the month of November. The US dollar has hit a rocky patch and the pound has taken full advantage, climbing 3.5% this month. UK inflation continues to rise and hit a staggering 11.1% in October, a 41-year high. The upward trend continued despite the government introducing an energy price guarantee. Inflation jumped from 10.1% in September and ahead of the consensus of 10.7%. Core CPI remained unchanged at 6.5%, but was higher than the forecast of 6.4%. The Bank of England hasn't been able to stem rising inflation despite tightening policy but will be hoping that its jumbo 0.75% hike earlier in November will take a bite out of the next inflation report. The UK economy is facing a double-whammy of high inflation and a recession, and all eyes will be on Finance Minister Jeremy Hunt, who will announce the government budget on Thursday. Hunt will aim to restore the government's credibility and stability, after the recent political soap opera which resulted in three different prime ministers in a matter of months and significant financial instability. The UK employment report on Tuesday was lukewarm, with unemployment ticking higher to 3.5%, up from 3.4%. The Bank of England will be concerned about the increase in wage growth, which will create even more inflation. Wages excluding bonuses rose to 5.7%, up from 5.5% and ahead of the consensus of 5.6%. The BoE will be under pressure to continue hiking aggressively, even though this will hurt the struggling UK economy. GBP/USD has pushed above resistance at 1.1878. The next resistance is 1.2030 1.1767 and 1.1660  are providing support
by OANDA
1
Pound soars despite weak job dataThe British pound has reversed directions on Tuesday and posted sharp gains. In the European session, GBP/USD is trading at 1.1902, up 1.22%. The pound has punched above 1.19 for the first time since August 19th. The UK employment report was soft, with unemployment ticking higher to 3.5%, up from 3.4%. Unemployment rose by 3.3 thousand, down from 3.9 thousand but well off the consensus of -12.6 thousand. The BoE will be most concerned about the increase in wage growth, which will create even more inflation, at a time when inflation is above 10%. Wages excluding bonuses rose to 5.7%, up from 5.5% and ahead of the consensus of 5.6%. There isn't much slack to speak of in the labour market and the BoE will be under pressure to continue hiking aggressively, even though this will hurt the struggling UK economy. The Fed may be breathing a bit easier today, as the exuberance which sent the stock markets flying last week appears to have subsided. Investors jumped all over the soft inflation report, as risk sentiment soared and the US dollar retreated. Fed members have responded by sticking to a hawkish script, as any dovish signals could complicate its battle to bring down inflation. Fed Vice Chair Brainard said on Monday that she favored slowing the pace of rate hikes, but that further hikes were required in order to bring down inflation. Brainard's stance was echoed by Fed member Waller who said that while the Fed may ease up on the size of future rate hikes, it should not be seen as a "softening" in its fight against inflation. Waller added that the 7.7% inflation reading in October was "enormous", a possible rebuke of the exuberance shown by investors to the drop in inflation. . GBP/USD has broken through several resistance lines today. The next resistance lines are 1.2030 and 1.2224 1.1703 and 1.1648 are providing support
by OANDA
GBP/USD steady after solid UK job dataGBP/USD is in positive territory today. In the European session, the pound is trading at 1.1731, up 0.42%. GBP/USD continues to take advantage of US dollar weakness and has gained 240 points since Thursday. Inflation has hit a staggering 10.1% and the Bank of England is projecting that inflation may not peak until 13%, with some analysts predicting an even higher peak. The manufacturing, services and construction sectors are either in contraction or stagnation and the country is going through a major change, with a new prime minister and a new monarch. The UK has phased out energy imports from the UK, but the weak EU economy is taking a toll on the UK, as the two are close trading partners. The UK labour market remains robust, one of the few bright lights in a grim economic landscape. Unemployment has fallen to 3.5%, a 50-year low, but wage growth in the three months to July rose 5.5% YoY, up from 5.2%. Employment rose by 40 thousand, down from 160 thousand prior and well below the forecast of 128 thousand. For the Bank of England, the job numbers actually increase the odds of a supersize 75 basis point hike next week, as wage growth continues to rise and the labour market continues to tighten. The BoE, which has failed to show until now that it can curb spiralling inflation, may regain some credibility with a 75bp move. All eyes are on the US inflation report, which will be released later today. The markets could be treated to mixed results - headline inflation is expected to drop to 8.1% (8.5% prior), while core CPI is forecast to rise to 6.1% (5.9% prior). With the Fed intent on remaining aggressive in order to tame inflation, the markets have priced in a 75bp increase at the September 21st meeting. The inflation release should be treated as a market-mover for the US dollar and has additional importance as it is the final key release before the Fed meeting. . GBP/USD faces resistance at 1.1790. Above, there is resistance at 1.1931 There is support at 1.1689 and 1.1548
by OANDA
Euro edges higher despite soft confidence dataThe euro has started the week in positive territory. In the North American session, EUR/USD is trading at 1.0217, up 0.36% on the day. The week wrapped up with a superb nonfarm payroll report, which sent the US dollar broadly higher. However, the gains proved to be short-lived, as the euro has recovered most of Friday's losses. The July nonfarm payroll report posted a blowout gain of 528 thousand, crushing the estimate of 250 thousand, and improving on the solid June release of 398 thousand. Unemployment ticked down to 3.5% from 3.6%, and wage growth remained unchanged at 5.2%, ahead of the forecast of 4.9%. The nonfarm payroll release was certainly impressive, but the Federal Reserve may be less than enthusiastic. Why? Since the data points to a tight labor market, especially the sharp gain in wages, as firms continue to experience labor shortages and must sweeten their compensation in order to attract employees. At 5.2%, wage growth is far higher than the Fed's inflation target of 2%, and Fed policy makers are concerned about a wage-price spiral which could increase inflationary pressures and force the Fed to remain hawkish. Fed officials were already pushing back against the idea that the rate-hike cycle was almost over, and with the latest employment numbers, the Fed may feel the need to remain aggressive and respond with another supersize 0.75% increase at the next policy meeting in September. Fed Chair Powell has said that the Fed will be data-dependent as it considers its next move, which means that upcoming inflation and employment reports will be crucial and carefully monitored by the markets and Fed officials. The eurozone could well face a recession, as Germany, the bellwether of the bloc, has posted weak data which is raising concerns. With a possible energy shortage this winter due if Russia decides to turn off the tap, the economic outlook is troubling. Unsurprisingly, German and eurozone confidence indicators have been pointing downwards, a reflection of uncertainty and pessimism. Earlier today, Eurozone Sentix Investor Confidence for August came in at -25.2, a bit better than the July reading of -26.4 but shy of the estimate of -24.7. This indicator has been mired in negative territory for a sixth straight month, pointing to prolonged pessimism amongst financial experts. EUR/USD is testing resistance at 1.0199. Above, there is resistance at 1.0274 There is support at 1.0103 and 1.0028
by OANDA
Aussie rises ahead of retail salesThe Australian dollar is in positive territory on Tuesday. AUD/USD is trading at 0.6944 in European trade, up 0.28% on the day. Australia releases retail sales for May on Wednesday. Retail sales is the primary gauge of consumer spending, and the markets are braced for a weak reading of 0.3%, following a 0.9% gain in April. Consumers are holding tightly onto their purse strings, as interest rates are on the rise and the cost-of-living crisis is intensifying. A deceleration in retail sales could cause slowdown fears and push the Australian dollar lower. The markets are already nervous about an economic slowdown, with the RBA in the midst of its rate-tightening cycle. The central bank surprised the markets with a super-size 0.50% hike earlier in June, and the RBA could deliver another 0.50% increase at next week's meeting, or stick with a modest 0.25% rise. The cash rate is still relatively low at 0.85%, and the Bank will have to raise rates aggressively in order to curb soaring inflation. On Friday, Governor Lowe stated that there were no plans to raise rates by a massive 0.75% hike at the upcoming meeting. This of course does not rule out the possibility of such a move at later meetings. Lowe suggested last week that wage growth should be about 3.5%, half of the 7% inflation rate that the RBA is projecting by year's end. This would essentially mean a pay cut for workers and could be the recipe for labour unrest if workers demand higher wages to compensate for soaring inflation. Wage growth has been very modest and is not a cause of the jump in inflation; rather, the war in Ukraine and supply chain disruptions, notably in China, have been the primary drivers of inflation. AUD/USD is testing resistance at 0.6936, followed by resistance at 0.7004 There is support at 0.6877 and 0.6809
by OANDA
M2 Adjusted Compensation of Employees Notice how everyone's wages were doing fine for TWO DECADES after Volcker was the FED chair? It's not coincidence. He was the most criticized FED chair in history because his policies WORKED for the working class. Fast forward to today, and we have turned the dollar into infinitely dividing pieces of confetti. These clowns at the FED are nothing more than puppets for the 1%. Real wages down 50% from 2000 and 20% from 2020. Hard to say it but I really don't see how this could ever improve unless we stop using the dollar. Now if only there was a currency where the money supply couldn't be expanded with political willpower... Good luck and hedge your bets
FRED:A576RC1
by fringe_chartist
2
Cdn. dollar rebounds after soft job dataThe Canadian dollar has started the week with strong gains, recovering after sharp losses at the end of the week. There are no Canadian tier-1 events on the calendar, so US numbers will have a magnified impact on the movement of the Canadian dollar. The US nonfarm payrolls outperformed in spectacular style, posting a gain of 467 thousand jobs in January. Many analysts had projected a negative print, and the consensus of 125 thousand showed that expectations were quite low. With inflation at 40-year highs, wage pressures are rising. Average hourly earnings climbed 5.7% in January y/y, as workers seek higher wages due to the rise in the cost of living. The strong NFP report will keep the pressure on the Fed not to ease up on the rate pedal after the (widely expected) March liftoff. It was a starkly different story north of the border, as the Canadian employment report for January was dismal. The economy shed 200.1 thousand jobs, after a gain of 78.6 thousand in November. The consensus stood at -117.5 thousand. The unemployment rate jumped from 6.0% to 6.5%, higher than the estimate of 6.2%. The weak Canadian jobs reports, coupled with a massive NFP which has raised expectations of more rate hikes, was a double-whammy that sent the Canadian dollar sharply lower on Friday. BoC Governor Tiff Macklem testified before a Senate banking committee in Ottawa last week, and his comments indicated that Macklem still views inflation as transitory, as he stated that the BoC expects inflation to ease in the second half of 2022. At the same time, Macklem was clear that additional interest rates are needed to lower inflation to the 2% target, with the number of hikes depending on economic developments. The BoC is widely expected to raise rates at its next meeting in early March, but similar to the Fed, there's lots of uncertainty about what happens after that. Macklem will speak on Wednesday and the markets will be looking for clues regarding future rate hikes. USD/CAD faces resistance at 1.2818 and 1.2873  1.2679 was tested in support earlier in the day. Below, there is support at 1.2595
by OANDA
The Crisis every investor is waiting for. What you gonna do?There are several factors in the market that raise concerns. Each of which could have a huge negative impact on the economy and the stock market. Lets take a look at it to clear our vision. At least that is what I am doing. What factors could that be. Inflation Wage Inflation Money Supply Money circulation Housing bubble China Regulations China Currency Manipulation China Delta Variance of Covid/ The Warren Buffet indicator In this episode I only will throw my thoughts in for a few things The other items will be explained at a later time. I have a lot of other things to do. Trading is 90% research and only of 10% mouse clicking. Inflation . CPI, the consumer price index, and the PPI, the producer price index. Certain stocks do better than other in an inflationary environment. If inflation hits too high consumer spending decreases and hence the demand shrinks and hence the economy starts to stagnate. We can see that the inflation rate is slowing (red), and the y/y rate (blue) is flattening. But we will see next month. This is something to watch out for. Feds might start tapering earlier than next year. Image missing The Producer Price Inde x is at high a level and sitting there. This will only decrease when transportation, sea ports, can keep up with demand and if raw material and commodity costs will decrease. But this can take a while and I expect the PPI staying at this level for a while and hence costs will be past on to the consumer. Hence the Consumer Price Index will follow. Image missing Wage Inflation . We should also take a quick look at the Wages and what they say.We can see that wages increased dramatically since May 2021 There is a shortage of labor. Labor is a commodity as everything else and the price follows supply and demand. But do not kid yourself. A company has to make profit and the labor is part of Cost of Goods sold, COGS. The company MUST increase prices to balance the wages increases. Thus, you wont make anymore money when you have to pay more at the till for what you buy!!! Wages increases mostly never benefit anyone, not the worker and not the company. The company become less competitive and the Worker pays more afterwards. The ONLY method to increase wages is by cutting taxes because taxes are NOT part of COGS and has no negative impact on companies. Just the opposite. With more money in the pocket the consumer starts more spending and that benefits the companies and they will produce more and hire more people. You see? Think about it. Your wage increase is not worth a dime with inflation. And wages increases drive inflation up! Thats why we advocate for smaller government, less regulations and less government spending. Image missing Money Supply , M1, is the amount of Cash circulating the system. It includes the "Free Money" printed by the FEDs given out to people due to Covid. "Stimulus check". The day-to-day money like cash, coins and checking deposits. We can see that since Covid the money made a huge jump and supply still is increasing. There is an enormous amount of cash in the system but does it circulate? Also keep in mind that when people spend money and do not produce the demand increases but the supply decreases. Add to it the sea ports, transportation bottlenecks and the open jobs, and you know why inflation is increasing dramatically. Image missing M1V is the velocity of Money . This is the speed of money in the circulation of the system. The day-to-day money like cash and coins. How many times a Dollar changes hand in a certain time period. A higher circulation rate or money flow indicates a greater economic activity, money is changing hands quicker. A slower rate of velocity indicates a sluggish or declining economy. Interesting to observe is that with Covid the money circulation fell out of the sky. Yes everybody was laid off. But when you take a closer look the change q/q is still negative, which means the circulation of money in the economy is still slowing down even though at a slower rate! This means that with an increase in money supply at hand of people, we will see a decline in spending!! Not good for the economy. Give me the Retail Numbers. Image missing M2 Money Stock includes M1 plus savings deposits, money market securities, mutual funds. This is one way the FEDs trying to keep the cocaine going. They buy MBA (Mortgage Backed Securities) and Bonds from banks in order to create more demand in order to keep bond prices up and the yields down. The 20 year Treasury Bond ETF, TLT from Barclays, i.e. With this the FEDs keep the money in the stock market. The bond prices are going up when the FEDs keep on buying. But with buying Bonds the yield (interests) are going down since you pay more for the fixed interest rate, which means the percentage of return per bond is shrinking because the yield stays the same but the price for the asset rises. It is an inverted relationship to the TBT. Image missing In the M2SL supply we can see that with Covid there was an money injection. After the Covid the money injection accelerated and is increasing fast, more inflation. And we can assume that lot of this money is with the bank. You can walk into any bank and get a personal loan, because money is a liability for the bank, loans generating profits. We can further assume with all the said before that even the banks do not know in what tangible projects to invest. Where is the infrastructure bill going? There is nothing so far. It is all warm air from the Biden administration. Further reading at investopedia dot com Conclusion Inflation is on the rise and will stay. Wages wont go back to before pandemic levels. Costumers also will get use to paying more for some items, like gasoline, energy and transportation, vacation. The Producer inflation for raw material and transportation is also going up and will stay high for a long time. Inflation cannot grow for ever and at such pace. The Feds have to start tapering soon. Then they will firstly reduc3e buying Bonds and MBA, which will drive the yield up. This also will cool the housing bubble a little since the banks are now required to carry the risks they could push to the FEDs by selling them MBAs. Mortgages will be harder to acquire. When the Feds starting to taper, they will reduce the flow of money, which is not yet increasing anyway, as we can see, they will battle inflation. What is your wage increase of 5.5% this year worth when the inflation hits 6%? Nada. You lose money. At the point of tapering the institutions will start moving money out of the stock market due to risks! And they will put it into bond and or Gold. If there is a crises developing that will include China and the Euro Zone they will also start buying US bonds the USD will rise. This conclusion is preliminary. The housing bubble and other indicator will follow. Please be advised, I am not a financial adviser. I am not recommending any trades. I am just a crazy guy with a wild brain. If you want to see the picture to the story, you have to go to hedgingstocks.blogspot dot com
SP:SPXShort
by Option_Crusader
4
Will Japan Household Spending rebound?The Japanese yen is drifting in the Monday session. In North American trade, USD/JPY is trading at 108.67, up 0.05%. The yen has posted four winning weeks out of the past five, as the US dollar continues to struggle. Still, the US/Japan rate differential continues to support USD/JPY, which remains in no man's land slightly below the 109 level. Japan will release Household Spending (GMT 23:30), and the consumer spending indicator is expected to rebound after two straight declines of 6.1% and 6.6%. The March release is projected to show a gain of 1.7%, which would mark a five-month gain. The market was gearing up for a blowout party from US nonfarm payrolls on Friday. In the end, however, the economy created just 266 thousand jobs, nowhere near the estimate of 990 thousand. There were expectations that NFP would break above the one-million mark, and some analysts even projected a reading above the two-million mark. The unemployment rate rose to 8.1%, up from 7.8%. Still, the news was not all bad, as wage growth rebounded with a strong gain of 0.7%, after a read of -0.1% beforehand. The US economy remains in good shape, and investors are unlikely to let a weak NFP report ruin optimism over the economy. The Fed has maintained a dovish stance, even with the economy posting strong numbers. The disappointing nonfarm payroll report appears to have justified the Fed's position, but investors will be keeping a close eye on this week's inflation numbers. A sharp rise in inflation could renew calls for the Fed to consider tapering. On the other hand, if the upcoming inflation numbers are weaker than expected, there will be less pressure on the Fed to change its accommodative policy. USD/JPY is facing resistance at 109.42. Above, there is resistance at 110.24. On the downside, there is support at 108.06 and 107.52
by OANDA
AUDJPY Market Overview & Possible Trade PlansChecking out AUD/JPY today as the pair recovers from an early Tuesday drop, likely on rising global risk aversion sentiment as coronavirus fears blaze up once again. Words are in town that by Apple, who issued revenue guidance warning www.theverge.com overnight, evoking fears of a more significant impact from the coronavirus outbreak on the global economy. This lead to a break of the rising trendline lower lows on the hourly chart, as seen above, but the bulls stepped in to halt the decline around the pivot weekly s1. The pair is now testing the past broken strong support area around 73.50, which could draw in sellers looking for another opportunity to play the risk-off sentiment at a better price. Be on the look out for bearish reversal patterns before considering a short play, and if the upcoming Australian data disappoints, then this pair could make a run for fresh break of today’s swing lows. For the bulls, a turn in Coronavirus sentiment could halt the decline, as well as a big positive surprise from Australia’s upcoming leading and wages data. A break above 73.50 in the scenario could draw further fresh buyers who could shoot for the 74.00 handle, which is well with reach knowing the ATR of around 60 pips for this cross pair.
by Anatta0
1
.PAYCHECK Index I was watching bloomberg today and an analyst mentioned the 'economy paycheck' as a measure of (payrolls * average hourly wages * average hours worked in a week) Here I have made the same index for observation. Interesting how it reversed clearly as the 08 crash happened and then bottomed clearly in 09; williams trader called for long in 2011 and also 2014. Pretty cool little index to watch; I just put some fib on there but it's basically useless imho as the QE cash flowing in has just allowed the paycheck index to barrel through any kind of levels this might suggest. Enjoy the index; tell me what you are seeing! GL HF xoxo -Snoop
A
by 420snoop
11