Tag: inflation

Are All Yen Bets Off?

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


Is the short bet on the Yen over? Well, maybe not when it comes to trade vs. the Dollar. But as far as other weaker currencies, that's a different story. As it relates to the Euro, then indeed, the long bet on the EUR/JPY might be over. And here's the reason why.

Inflation might be coming back

That's a rather straightforward statement, but the Bank of Japan believes that inflation is inching higher. And while it's not as clear-cut a case a, let's say in the US, still there is a basis for it. When calculating Japan's inflation, excluding volatile prices such as food and energy, inflation gained 0.6%. Now, while that's still low, it's a move in the positive direction.

Moreover, a quick look at the inflation figures per segments and you can see most segments have experienced price increases. That is a mildly hawkish sign. It must be pointed out that the BOJ is about to change the way it measures core inflation. Going forward, the BOJ will publish core inflation figures, calculated both with and without energy prices. However, the BOJ will focus on core inflation excluding energy prices. Previously, by including them, it distorted the inflation figures into the downside. Continue reading "Are All Yen Bets Off?" →

Dollar's Fate To Be Decided In Beijing?

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


Last week's GDP growth figures proved that US economic performance is still pretty mediocre, bordering on mildly tepid. While the Hawks were eyeing a 2.6% growth figure, actual GDP fell short of expectations and posted a rather dismal growth rate of 2.3% annualized.

Yesterday, we got the Fed's favorite inflation indicator, Core PCE, the inflation barometer that's extracted from the GDP release. And what we got was a dismal 1.3% inflation rate (YoY). This validated, once again, that the US economy failed to reach escape velocity that would necessitate several rate hikes a year. Rather, it suggested that anything beyond one or two rate hikes was unnecessary. Hardly a hawkish sign, yet Dollar demand keeps on rising while US yields move lower. It is this very combination that suggests that Dollar demand is being stirred by the demand of US Treasuries. Some say that this is investors moving into safety amid the rout in Chinese markets. Well, that's probably true, at least, in part. But the rest? There's a big bet on what China will do next. Continue reading "Dollar's Fate To Be Decided In Beijing?" →

How Many Rate Hikes Can The U.S. Handle?

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


The FOMC meeting ended yesterday as many had expected. Besides some marginal tweaks in the language, the message remained the same; data will determine our rate policy. Now, hours after the latest US GDP figures hit the newswires, it seems that Dollar Bulls are gearing up towards a September rate hike. Part of their rationale is because the data is good enough to sustain a rate hike. And that’s essentially true. With wages growing annually at 2%, Core Inflation at 1.7%, unemployment at 1.8% and now GDP bouncing back, indeed, a rate hike is warranted. At the same time, there are essentially no signs that the US economy is overheating. Rather, we’re seeing notable signs of stabilization. This, then, begs the question: How many rate hikes can the US handle in the upcoming year?

No Escape Velocity in GDP

When we examine the dynamics of GDP growth, it’s evident that the US GDP growth rate is not breaking the range. Instead, it has the same cycles that tend to end around the 3% growth rate. After that, the US economy tends to decelerate, only to regain momentum later. But this range of growth has not been broken. This means that there’s no evidence that US GDP is at escape velocity, a pace which would require several rate hikes a year.

United States GDP Annual Growth Rate
Chart courtesy of Tradingeconomics.com

No Escape Velocity in Inflation

When we examine US Core Inflation, a similar picture emerges. US inflation is within the Fed’s 2% range and is showing no signs of overheating, i.e. escaping the Fed’s target. Rather, every time it reaches the 2% range, it tends to cool and then slide slightly lower. Continue reading "How Many Rate Hikes Can The U.S. Handle?" →

The Fed's Gift of Free Money: Return to Sender

Posted on by The INO.com Team

By Elliott Wave International

On June 2, the postman rang once -- and, boy, did he ring.

That day, the Wall Street Journal published a strongly worded letter titled, "Grand Central: A Letter to Stingy American Consumers," which included these notable passages:

"Dear American Consumer,

"This is the Wall Street Journal. We're writing to ask if something is bothering you. The sun shined in April and you didn't spend much money. The Commerce Department here in Washington says your spending didn't increase at all, adjusted for inflation last month, compared to March.

"You've been saving more too. You socked away 5.6% of your income in April after taxes, even more than in March. This saving is not like you. What's up?

"Fed officials want to start raising the cost of your borrowing because they worry they've been giving you a free ride for too long with zero interest rates. We listen to Fed officials all of the time here at The Wall Street Journal, and they just can't figure you out."

Well, on behalf of the "stingy American consumer," we'd like to answer this letter to best of our ability. Continue reading "The Fed's Gift of Free Money: Return to Sender" →

When Two Women Get Into A Fight, It's Never Pretty

Posted on by The INO.com Team

This morning, Christine Lagarde, the boss of the International Monetary Fund, announced to the world that the Federal Reserve should hold off raising interest rates until 2016. I do not ever remember the head of the IMF ever saying anything like that before.

So the question begets, is she trying to save her own skin by doing a classic political move and pointing the finger at somebody else, in this case Janet Yellen, head of the Federal Reserve?

My advice on this, it's not going to be pretty and the IMF should take care of its own screw-ups (like Greece) before trying to fix the screw-ups in America.

With that said, let's take a look at what's really going on in the marketplace today. I'm going to look at the major indices with the Trade Triangle technology, which by the way is totally nonpartisan and unbiased, and just goes with the flow.

Here's what the Trade Triangle technology is saying right now. Continue reading "When Two Women Get Into A Fight, It's Never Pretty" →