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Currencies Tumble As Inflation Worries Grow

By Kathy LienForexNov 09, 2021 04:15PM ET
www.investing.com/analysis/currencies-tumble-as-inflation-worries-grow-200607836
Currencies Tumble As Inflation Worries Grow
By Kathy Lien   |  Nov 09, 2021 04:15PM ET
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Risk appetite soured today as the Dow Jones Industrial Average closed lower for the first time in nine trading days. The simultaneous decline in currencies and Treasury yields confirms our view that investors are growing concerned about high inflation. USD/JPY dropped to its lowest level in nearly a month. This is not because of the impact on U.S. rates but because of the impact on the economy. Producer prices rose 0.6% in the month of October, right in line with expectations. Although core PPI and the year-over-year rate growth was slightly weaker than anticipated, at 8.6%, wholesale prices grew at their fastest pace in more than a decade. Tomorrow’s consumer price index is generally more market-moving and today’s report gives investors very good reasons to believe that CPI will be hot.  
 
The problem is that the pace of growth isn’t keeping up with the pace of inflation, and that’s what makes us worry. Yields are falling and stocks are falling because investors are concerned that consumer pocketbooks will be pinched by higher prices this holiday season. The supply-chain problem could prove to be even more troublesome as less inventory drives up prices. This means that consumers will have to dip into their savings or spend less. Thanksgiving is approaching quickly in the U.S. and, according to agriculture experts, the cost of turkeys is up as much as 25% due to shipping and labor constraints. Some markets are subsidizing the difference to get customers into their shops, but only if they spend more on other goods that have also increased in price.
 
Japanese Yen crosses were hit the hardest, with AUD/JPY and NZD/JPY leading the slide. That’s no surprise because AUD and NZD are particularly sensitive to risk appetite. Australian business confidence and New Zealand credit-card spending increased sharply in the month of October. Australian consumer confidence numbers are due for release this evening, and we continue to expect confidence to be bolstered by warmer weather and fewer restrictions. Inflation numbers are due from China as well and, like the U.S. prices, are expected to have increased sharply last month. 
 
The euro ended the day unchanged despite dovish comments from European Central Bank officials. According to ECB member Klaas Knot, conditions for a rate hike are not unlikely to met in 2022. The latest economic reports from Germany were mixed. While the country’s trade surplus increased, exports declined and imports rose less than expected. The current conditions component of the German ZEW survey fell sharply, but the expectations component increased. The Eurozone index also ticked higher, a sign that investors are still optimistic about the recovery. The Canadian dollar shrugged off a sharp recovery in oil to end the day unchanged against the greenback.  
Currencies Tumble As Inflation Worries Grow
 

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Currencies Tumble As Inflation Worries Grow

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Comments (12)
Sweet Sajol
Sweet Sajol Nov 12, 2021 4:29PM ET
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hi my from Bangladesh
Dr Divindre
Dr Divindre Nov 10, 2021 6:56AM ET
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I wished traders here focuses on saying that we eith buy the dollar or sell the dollar than to deviate and focus on the Fed.
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Nov 10, 2021 1:20AM ET
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Dr. Jerome Bubble is finally cured of his chronic constipation; he will start delivering big chunky lumpy droppings in stocks soon. That will make USD go down. Thank you Trump and Tracy
visar krosi
visar krosi Nov 09, 2021 7:44PM ET
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no many no funy
Rick Rice
Rick Rice Nov 09, 2021 7:02PM ET
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Of course inflation is transitory. How long is the question. If a major crash happens, gross money supply will drop like a rock and inflation will be over. Patience is a virtue.
Kevin McCarthy
Kevin McCarthy Nov 09, 2021 6:40PM ET
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this is all just a big joke. we knew inflation wasn't transitory. Powell and the FED need to be held accountable. pretty much the only solution right now is the FED burning its oversized position in the markets and taking a total loss. anything else will just add fuel to Brandon's dumpster fire. we really need Trump back!
Chris Poulos
Chris Poulos Nov 09, 2021 6:40PM ET
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we REALLY dont ...
Paul Browning
Paul Browning Nov 09, 2021 6:40PM ET
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Powell was appointed by Trump actually one of the few reasonable things he did. So Trump put us in this situation.
la popeye
la popeye Nov 09, 2021 6:40PM ET
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thx paul browning for reminding Mc Carthy (!)...that too much reality tv show can alter the brain and memory severely. Warning label on tweeter as well
Dr Divindre
Dr Divindre Nov 09, 2021 6:40PM ET
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Talk about buying or selling usd and leaving politicians. Traders don't talk politicians. They focus on the money
Syed Doha
Syed Doha Nov 09, 2021 6:12PM ET
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Pretty much all asset classes have peaked - Fed's positioning against COVID risk could well be warranted, but I don't think Fed's toolbox would be as equipped as everyone thinks. Inflation is not only here but also seems to have all the pegs closed against it. Fed though remains as mighty as it always had been to rectify its mistakes - if any - by the sheer power as it had in the past.
Paul Browning
Paul Browning Nov 09, 2021 6:12PM ET
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We also have a flat yield curve. What can the Fed do in response to a liquidity crisis like 2008?
Syed Doha
Syed Doha Nov 09, 2021 6:12PM ET
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Paul Browning I think the current flattening of the yield curve has more to do with market participants' signaling - Fed's move toward liftoff - would be sooner than the Fed's announcement than being deflationary.
Dr Divindre
Dr Divindre Nov 09, 2021 6:12PM ET
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With fed position on the market, we should be more interested in either buying or selling the dollars and not defending or attacking the Fed.
Christine hazel Castillo
Christine hazel Castillo Nov 09, 2021 5:43PM ET
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how to invest money here
Kevin O Leary
Kevin O Leary Nov 09, 2021 5:38PM ET
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The dollar as a whole didnt fall as much. Still a strong dollar… currently. Could change next month but currently still relatively strong
Cos Tin
Cos Tin Nov 09, 2021 5:33PM ET
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Gold may be the solution - it is increasing for 4 days in a row
Kevin Avila
Kevin Avila Nov 09, 2021 5:09PM ET
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No rate hikes = “Let them eat cake!”
Saquib Amir
Saquib Amir Nov 09, 2021 4:43PM ET
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help me dear
 
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