Something doesn’t feel right with Fed expectations [Video]
|Yesterday was one of those days when investors insisted on seeing a glass that was one-tenth full as completely full. The US producer price data came in higher than expected. US President Joe Biden announced eye-watering tariffs on Chinese imports – that’s inflationary – and the Federal Reserve (Fed) President Jerome Powell called for patience, again yesterday, and said that they did not expect the inflation battle ‘to be a smooth road’ but that the numbers ‘were higher than anybody expected’, and that it will probably take them ‘longer… to become confident that inflation is coming down to 2%’. Indeed, Biden is throwing a wrench in the works of the Fed with his China trade policy.
Overall, the inflation, Fed and China news weren’t supportive. But the market was quick to shrug off the bad news because some components of the PPI number that feed into the PCE – the Fed’s favourite gauge of inflation that’s due later in the month – were more muted.
All eyes are on the US CPI update today. Both headline and core inflation are expected to have moderated last month. If that’s the case, the risk rally will likely continue. And if it’s not the case, the risk rally could continue, as well. Until when? Until it doesn’t.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.