The St. Louis Federal Reserve's James Bullard has crossed the wires and stated that the market-based expectations of inflation are "now relatively low" and that the economy is growing faster than previously thought with unemployment below the long-run rate and output above its potential.
He said inflation "remains too high" but note that it has come down recently noting that a "disinflationary" process had begun and could continue with additional Fed rate increases.
"Continued policy rate increases can help lock in a disinflationary trend during 2023, even with ongoing growth and strong labor markets, by keeping inflation expectations low."
US Dollar update
As the above analysis illustrates, the US dollar, as measured against a basket of currencies, has been breaking to the upside and out of a geometrical consolidation's top side resistance albeit on the backside of the prior bullish trends supporting lines.
It has been a slow grind higher for the US Dollar and not even firmly hawkish Federal Reserve rhetoric and data have been able to free up the bulls from the clutches o the bears. However, should the DXY close firmly above 103.65/80 this week, a case for higher could be drawn, as per the following daily chart analysis:
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Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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