US Dollar Price Forecast: USD Plunges Towards Make-Or-Break Support
The US Dollar is in freefall with DXY now down more than 3.1% since the start of November. The plunge takes the index towards multi-month trend support and the last line of defense for the bulls. The fate of the July rally now hangs in the balance. These are the updated targets and invalidation levels that matter on the DXY weekly technical chart. chart Technical Outlook: In my last US Dollar Technical Forecast we noted that DXT had, “reinforced a key range between 105.39-107.18 – looking for the breakout for guidance with the long-bias still vulnerable while below.” An outside-weekly reversal the following ... (full story)
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The story of Germany in the years after the First World War is a striking reminder of how price stability and democracy go hand in hand. The historian Gerald Feldman famously called those troubled years ďthe Great DisorderĒ.[ 1 ] And although the relative contributions of the hyperinflation of the 1920s and the deflation of the 1930s are still debated, there is little doubt that wild swings in prices eroded the economic foundations of democracy. One of the ways in which price instability does this is by triggering large distributional effects, which often hurt the poorest in society the most. For example, ECB analysis finds that the spike in inflation over the last 18 months has disproportionately affected low-income households as they spend more of their income on necessities like energy and food, which saw surging prices.[ 2 ] These are fundamental reasons why, in most liberal democracies, central banks have been entrusted with mandates to preserve price stability. And at the ECB, we will never compromise on our mandate. That is why, in response to rising inflation, we raised interest rates at the fastest pace in our history, by 450 basis points in just over a year. And we will return inflation to our medium-term target in a timely manner. post: <EUR=>:*LAGARDE: NOT THE TIME TO START DECLARING VICTORY ON INFLATION *ECB'S LAGARDE: CAN ACT IF WE SEE RISING RISKS OF MISSING TARGET post: *LAGARDE: FUTURE DECISIONS CONDITIONAL ON INCOMING DATA *LAGARDE: CAN ALLOW SOME TIME FOR ECB POLICY TO UNFOLD post: ECB Pres Lagarde: Expect Headline Inflation To Rise Again Slightly
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Canada is in a soft patch for inflation but letís not get carried away. Markets largely shook it all off as CAD strengthened a touch versus the USD and the 2-year yield climbed ...
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The manager turned first to a review of developments in financial markets over the intermeeting period. Financial conditions continued to tighten, driven by higher yields on Treasury securities as well as by lower equity prices and a stronger dollar, which themselves partly reflected higher interest rates. Because earnings expectations had held up well in recent months, the effect of higher interest rates on equity prices likely took place largely through valuations. The rise since July in yields on longer-dated nominal Treasury securities was mostly attributable to increases in real yields. There were small increases in inflation compensation, but the levels of spot and forward rates were within historical ranges. The manager also noted that survey measures pointed to generally stable inflation expectations, especially at longer horizons, and that inflation expectations remained well anchored. Staff analysis and responses from the Open Market Desk's Survey of Primary Dealers and Survey of Market Participants suggested that the bulk of the increase since July in the 10-year nominal Treasury yield could be attributed to a higher term premium, though higher policy expectations at longer horizons could also have played a role. The manager also noted that liquidity conditions in the Treasury market had not changed materially since July, suggesting that Treasury market liquidity had not been an important driver of the increase in yields. The manager turned next to expectations for monetary policy. Both market pricing and responses to the Desk's surveys implied that market participants expected that the federal funds rate was at or near its peak and would be held there at least until the June 2024 FOMC meeting; there was a roughly 30 percent probability of a 25 basis point increase at either the December or January FOMC meeting. Regarding balance sheet policy, the surveys showed that respondents had pushed out the date they expected balance sheet runoff to stop, perhaps partly in response to policymakers' communications that balance sheet runoff could continue even after the Committee begins to reduce the target range for the federal funds rate. The manager then turned to developments in money markets and Desk operations. Balance sheet runoff continued to proceed smoothly over the intermeeting period through reduced holdings of Treasury securities, agency debt, and agency mortgage-backed securities. The continued repayment by the Federal Deposit Insurance Corporation of discount window loans extended to banks that were placed into receivership also contributed to reduced Federal Reserve assets. On the liabilities side of the balance sheet, usage of the overnight reverse repurchase agreement (ON RRP) facility declined further, as money market mutual funds continued to absorb new Treasury bill issuance and appeared to increase investment in the private market for repurchase agreements (repos) as well. Overall, the reduced usage of the ON RRP facility released more reserves than the reduction in Federal Reserve assets and the increase in the Treasury General Account absorbed. On post: FOMC MINUTES: PARTICIPANTS AGAIN AGREE MORE TIGHTENING MAY BE NEEDED IF AGGRESSIVE INFLATION PERSISTENT #FOMC #minutes #economy post: *FED MINUTES: ALL ON FOMC AGREE TO `PROCEED CAREFULLY' ON RATES *ALL ON FOMC SAW RATES REMAINING RESTRICTIVE FOR SOME TIME post: FED MINUTES: PARTICIPANTS NOTED THAT INFLATION HAD MODERATED OVER THE PAST YEAR BUT REMAINED UNACCEPTABLY HIGH AND WELL ABOVE 2% TARGET. post: FED MINUTES: PARTICIPANTS NOTED THERE HAD BEEN ONLY LIMITED PROGRESS IN BRINGING DOWN CORE SERVICES EX HOUSING INFLATION.