U.S. Dollar Extends Corrective Recovery as Inflation Worries Return
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The US Dollar is moving higher since US CPI came out much stronger than expected this week, so FED will maybe have to be more aggressive. There was a jump in jobs for January, and also retail sales came out stronger (3%), so clearly, inflation is still here, and they may want to fight it with higher rates.
In fact, there can be some speculation that FED will again move from 25bp to 50bp increases in the next meetings. That’s one of the reasons why the USD is trading higher with US yields, but interestingly, stocks are not coming down, not to mention bullish cryptos! Stocks are actually sideways, so if FED, for any reason, will not be more aggressive than it currently is, then stocks may easily break much higher later.
But firstly, USD has to complete a corrective recovery which is not the case yet. We see USD equal-weighted index trading at a new high of the week, so ideally, wave C is in play but still incomplete. Therefore, AUD, EUR, GBP, CHF, JPY, and similar majors can suffer more in the short term.
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