Today, key reports released in the United States and the Eurozone revealed what citizens around the world were well aware of. Inflation continues to soar and at staggering levels. This prompted Credit Suisse to issue a gloomy global economic outlook, saying “the worst is yet to come”.
The Commerce Department released the latest inflation data against the PCE which revealed that the Core PCE jumped 0.6% in August. It shows that inflation is still intense and increasing. The Federal Reserve’s preferred indicator, the PCE (Personal Consumption Expenditures Price Index) revealed that inflation accelerated even more than expected in August. On a yearly basis, core PCE, which omits food and energy costs, rose 4.9%, above the forecast of 4.7%.
It was reported by Dow Jones newswires that eurozone inflation hit a new high of 10% in September. Dow Jones reported: “The Consumer Price Index – a measure of what consumers pay for goods and services – rose 10.0% in September from the same month a year earlier after climbing by 9.1% in August, according to preliminary data from Eurostat, the European Union’s statistical agency.
The Eurozone CPI differs from that of the United States in that energy prices rose 40.8% year-on-year in September after rising 38.6% in August. The latest US CPI figures showed a slight decline in August from 8.5% to 8.3%.
After five consecutive interest rate hikes, including three consecutive 75 basis point hikes at the last three FOMC meetings, the Federal Reserve raised interest rates from 0-¼% in March 2022 to its current range of 3% to 3 ¼% since March. However, today’s report suggests that the Fed’s extremely aggressive rate hikes have yet to bring inflation down.
Vice President Lael Brainard spoke at a research conference hosted by the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York, saying, “Inflation is very high in the United States. United and abroad, and the risk of additional inflation She later added that policymakers were “committed to avoiding premature backsliding by saying that “monetary policy will have to be tight for a while to have confidence that the inflation returns to target.
This week, gold futures are based on the most active December contract traded at a low of $1621, a high of $1684.40 and as of 5 p.m. EDT is currently set at $1668.30. after taking into account today’s net decline of 0.02% or $0.30. Until December gold can actually close above $1680 an ounce, there is still a tail risk that gold will drift lower if strong dollar strength, as seen recently, continues.
Chart 4 is a daily chart of the dollar index in Heikin-Ashi format. It differs from a standard candlestick chart in that the open is set from the midpoint of the previous candle. It clearly illustrates a potential pivot by looking at the third candle from the right which is green and has an extremely small actual body and long upper and lower wicks. This is followed by the two green candles.
Chart 5 is also a daily Japanese chart in Heikin-Ashi format. It shows the opposite pivot with a series of red candles up to three days ago when the color of the candle changed from red to green with a small green real body with long upper and lower wicks. These two charts indicate that on a technical basis, we could see a near-term pivot with the dollar going from extremely bullish to bearish, and gold going from extremely bearish to bullish.
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Wishing you as always good exchanges and good health,
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