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FX: It's All About Inflation Tomorrow

By Kathy LienForexMay 18, 2021 04:03PM ET
www.investing.com/analysis/fx-its-all-about-inflation-tomorrow-200580982
FX: It's All About Inflation Tomorrow
By Kathy Lien   |  May 18, 2021 04:03PM ET
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Weaker U.S. data is finally catching up to the U.S. dollar. The greenback traded lower against all of the major currencies on Tuesday following softer housing data. Building permits grew 0.3% in the month of April, down from 1.7% in March, while housing starts dropped 9.5%. While housing demand is still very strong, the cost of raw materials like lumber have skyrocketed in recent months. In the 12 months to April, lumber prices rose more than 89%. Between weak job growth, the decline in spending, a slowdown in manufacturing activity in the New York region and now housing, it was only a matter of time before the U.S. dollar sold off across the board as these reports reinforce the Federal Reserve’s reluctance to respond to rising price pressures. At a time when the global recovery is gaining momentum, the U.S. dollar should underperform.
 
The euro rose to its strongest level in nearly three months against the U.S. dollar. As we mentioned in yesterday’s note, the relaxation of lockdown restrictions across Europe will revive demand for euros. The February swing high of 1.2243 is the closest level of resistance, and we think it will break easily, with EUR/USD making a run for 1.23. GBP/USD also closed in on three-month highs. The job market in the UK is hot, with 84,000 new workers added in the month of February. The claimant count also fell 15,000 and the unemployment rate dipped to 4.8% from 4.9%. Although average earnings growth including bonuses slowed to 4% from 4.5%, excluding bonuses wage growth accelerated.
 
Inflation will be the main focus for the next 24 hours, with consumer price reports scheduled for release from New Zealand, the UK, the Eurozone and Canada. With the exception of the euro area, where final numbers are anticipated, all countries are expected to report sharply higher price pressures, which could provide near-term boosts for their currencies. In fact, the New Zealand dollar was one of the day’s best performing currencies. No economic reports were released outside of dairy prices, which fell sharply. An uptick in PPI could renew talk of tightening by the RBNZ, which is already concerned about house prices.  
 
The Canadian dollar rose to its strongest level in six years versus the greenback despite lower oil prices. According to the IVEY PMI report, prices in Canada rose sharply last month. The Bank of Canada was one of the first central banks to taper asset purchases and tomorrow’s inflation report is widely expected to validate its move.
FX: It's All About Inflation Tomorrow
 

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FX: It's All About Inflation Tomorrow

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Comments (17)
William Bailey
William Bailey May 20, 2021 3:14AM ET
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Blah blah blah .... The Fed nearly at the end of credit capacity and bluffing .,,, asset crash nearby
Shawn Gachassin
Shawn Gachassin May 20, 2021 3:14AM ET
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Thanks pops
Itachi Uchiha
Itachi Uchiha May 20, 2021 3:14AM ET
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I do not understand you. Can you explain me?
Quddus Quddus
Quddus Quddus May 19, 2021 6:34AM ET
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hi iam irfan
Chukwura joshua
Chukwura joshua May 19, 2021 2:13AM ET
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How is GBPUSD looking today?
Al Zarooni
Al Zarooni May 19, 2021 2:13AM ET
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Down after 5:00 pm
Chukwura joshua
Chukwura joshua May 19, 2021 1:08AM ET
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What about today....will it still bull?
nadya aziziah
nadya aziziah May 19, 2021 1:08AM ET
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not yet i guess
Chukwura joshua
Chukwura joshua May 19, 2021 1:08AM ET
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Thanks
William Bailey
William Bailey May 19, 2021 12:44AM ET
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Fed needs to stop giving all the cash to stocks
Murali Brahmandam
Murali Brahmandam May 18, 2021 11:31PM ET
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PPP still controls FX pricing. Interest rate differentials finally decide where the water flows. Not by what sillyelon says
Chris Poulos
Chris Poulos May 18, 2021 10:01PM ET
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usd is near multi year lows against a number of currencies. cad, aud, chf, gbp ... at some point the narrative will reverse. right now they want you to sell dollars ... something tells me were gonna see  'surprising' strength from the usd soon ... based on whatever the next thing is ... global political upheaval, more covid stuff, something musk says, you name it. im not selling usd ... nice try.
Luqman Firdaus
Luqman Firdaus May 18, 2021 9:54PM ET
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ok businnes name company CV. Sakinah Anugerah Firdaus Mandiri General contractro & Supplier
Sawyer Colosimo
Sawyer Colosimo May 18, 2021 8:43PM ET
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what about the British pound yo
Mark Red
Mark Red May 18, 2021 6:02PM ET
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Transitory inflation, dont buy hype and get stuck at the top with metals
The GOAT
The_Goat May 18, 2021 6:02PM ET
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Jerome is that you?
Mark Lee
Mark Lee May 18, 2021 6:01PM ET
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The rich getting richer at a discount.
trevor hron
trevor hron May 18, 2021 6:01PM ET
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Thats about how it goes
trevor hron
trevor hron May 18, 2021 6:01PM ET
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Thats about how it goes
Bulent Ok
Bulent Ok May 18, 2021 5:44PM ET
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Dollar will come back... It always does... The yankies are fiddling with numbers for now... It only takes couple of artificial headlines to reverse it all for greenback.
Martin Rodriguez
Martin Rodriguez May 18, 2021 5:44PM ET
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If they slap cryptocurrency. Those wallets holding billions. it's safer holding stocks than cryptos.
Liam Andrade
Liam Andrade May 18, 2021 5:44PM ET
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Good luck
Bulent Ok
Bulent Ok May 18, 2021 5:44PM ET
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What you mean by if they slap crypto?
Bulent Ok
Bulent Ok May 18, 2021 5:44PM ET
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Nothing at this market climate is safer... The safest bet is to diversify accordingly... Or just liquidate and wait on the sideline with cash that is exposed to inflation.... Now that also is not a sensible thing to do... Probably the best thing is to go out enjoy spend every *******cent while you got it... As it one way or another going to be shrinking in value... Stocks we are experiencing same thing as last march.. The lockdown crash... They reversed it all back to ROUGLY that time prices... It might be sensible to get in with right stocks, because I feel that we could have another run until next February then another downhill... Life somehow will have to turn to normal... Economies can not afford to have couch potatoes... For long... So buy stocks accordingly... Crypto is now in the DNA of the society... And history has shown that it tanks and it gains again... So common sense... Buy dips.. Everything that dips buy, if they further dip buy... Never sell until happy to do so..
Bulent Ok
Bulent Ok May 18, 2021 5:44PM ET
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Market corrections or crashes are sistematicaly done to get you and I to sell... The only way they make large sums are when we panic and sell... You can never loose if you don't sell... The only thing you might loose is time.. Waiting for recovery of the asset. Or if the underlying companies go bust... But then we stick to household names.. We'll routed companies... NEVER EVER SELL FOR A LOSS....
Maxamuud Casayr
Maxamuud Casayr May 18, 2021 5:38PM ET
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waxan rabaa inaa soo toman
Billa Nirmal
Billa Nirmal May 18, 2021 4:39PM ET
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Eur/usd is bull on Tomorrow?
Mir Chang
Mir Chang May 18, 2021 4:39PM ET
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No its going to consolidate and take profits. U wish.
Chukwura joshua
Chukwura joshua May 18, 2021 4:39PM ET
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And then sell or what?
Jimmy Tsang
Jimmy Tsang May 18, 2021 4:39PM ET
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Inflation is a must when economy is growing!!!!!! 2009: 10 yr bond rate 2.68% with unemployment rate at 10%! Oil $41!2011: 10 yr bond rate 3.15%, oil $113!! Dow went up 70% from 2009!
Filippo Bulgarini d Elci
Filippo Bulgarini d Elci May 18, 2021 4:39PM ET
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Lol! U got massive debt, plus 30% extra usd printed last year... Not the same pattern. Buy Bitcoin, the only store of value
John Cerniuk
John Cerniuk May 18, 2021 4:39PM ET
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but to what extent you Have to ask yourself
John Cerniuk
John Cerniuk May 18, 2021 4:39PM ET
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and they aren't done printing money yet
trevor hron
trevor hron May 18, 2021 4:39PM ET
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Its not a must. Its a tool to transfer or build wealth. But usually its the top 5% that end up getting the good majority of it for the so called trickle down effect. The reason inflation comes in so hot when they are trying to get growth momentum going its because the money is being printed at a really high rate. So the government does infact get money into the hands of most Americans at some point. But how much is stolen or pocketed for fees ans taxes before most people see any of it? Its well over 65% that companies and other elites get to pocket of that stimulus money. So the money printing has to be so great ans plentiful as to overcome all of this deflation or stagflation. Which normally lead to recessions but thats beside the point. The government has to print $10 for every $1 making it out to the upper, lower and middle class. When we’re the ones supporting the country by the taxes we pay. What a vicious cycle
Ahti Sinkkonen
Ahti Sinkkonen May 18, 2021 4:39PM ET
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what if dow&oil went up because of decreased value of usd->have to pay more for them
Jon Bal
Jon Bal May 18, 2021 4:26PM ET
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i guess the bets were on the $15 minimum wage passing to soak up all those digital dollars..womp womp
Katie Belle
Katie Belle May 18, 2021 4:11PM ET
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you're the best Kathy!
 
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