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Inflation

DXY: BRICS Creating New Reserve CurrencyHi Traders, Investors and Speculators of the Charts 📈📉 Ev here. Been trading crypto since 2017 and later got into stocks. I have 3 board exams on financial markets and studied economics from a top tier university for a year. For the past eight decades, the U.S. dollar has been the dominant global currency following the Second World War. It has been widely accepted worldwide, with only a few exceptions, and is commonly recognized by the image of Andrew Jackson and the seal of the U.S. Treasury, making it the most recognizable export of the United States. The U.S. dollar became the reserve currency of the world following the Second World War, mainly because the United States was the dominant global economic and military power at the time. The Bretton Woods Agreement of 1944 also played a crucial role in establishing the dollar's role as the world's reserve currency. Under this agreement, other countries agreed to peg their currencies to the U.S. dollar, which was backed by gold. This made the U.S. dollar a stable and reliable currency for international transactions, leading to its widespread acceptance as a reserve currency. Additionally, the U.S. had a large trade surplus, making it easier for other countries to hold dollars as reserves to pay for U.S. goods and services. The dominance of the U.S. dollar as the world's reserve currency has been a source of both admiration and resentment among other countries and superpowers. Many countries have benefited from the stability and liquidity that the U.S. dollar provides as a reserve currency, allowing them to conduct international trade and investments with greater ease. However, some countries have also experienced the negative effects of dollar dominance, such as the risk of currency fluctuations and the potential for U.S. monetary policy decisions to have spillover effects on their own economies. The U.S. dollar was not only commonly used in international transactions but also widely held as a long-term store of value across the globe. Central banks worldwide held more U.S. dollars than any other currency. This resulted in low borrowing costs for Americans , which allowed middle-class people to buy homes. Furthermore, the U.S. government was able to incur significant debts without apparent consequences due to the dollar's global dominance. Americans may not have been aware of this situation, but it had a favorable impact on their daily lives. Occasionally, the Congress discussed the debt ceiling, but it seemed like an abstract topic that most people did not care about since America controlled the global reserve currency and could print U.S. dollars. This privilege made money cheap, and Americans enjoyed benefits that were not available to other countries. However, the thought of losing this dominance was too terrible to contemplate, and concerns began to arise around the time the Russian military entered Ukraine about a year ago. The consequences of such a loss would be dire, and it was a worrisome issue. The Russian military's invasion of Ukraine was destabilizing, as wars typically are. However, it was the West's reaction to the invasion that raised concerns. U.S. policymakers, led by USA President Joe Biden and supported by Republican senators, seemed intent on not only toppling the Russian government but also disrupting the post-World War II economic order that had benefitted the U.S. for decades. The sanctions weren't expected to harm the U.S. economy more than the Russian economy. Russia's economy is not heavily reliant on financial services but on natural resources such as oil, gas, iron, and coal . Despite the sanctions imposed on Russia, its Ruble remains stable against the US dollar, which suggests that the sanctions did not have a significant long-term impact on Russia's economy. The seizure of Russia's central bank's dollar reserves was intended to collapse Russia's credit system and cause bank runs, but it didn't happen. The USA did not consider the dangers when using the dollar, the sign of security and unity, as a weapon. The result of this is unsurprising, many countries lost confidence in the dollar. And so, Russia, Brazil, Pakistan, India, Malaysia, France, China, and Saudi Arabia are conducting business in currencies other than the US dollar, such as the Chinese currency Yuan. This is happening at a fast pace and shutting out the US dollar, which is losing trust from other countries due to its use as a weapon and excessive printing, leading to inflation and currency devaluation. 💭Final Thoughts 💭 We look to history to speculate on the future. As the saying goes, history repeats itself. During the First World War, the German government borrowed heavily to finance the war effort, resulting in a significant increase in national debt. The government continued to print money to pay for its expenses, which led to hyperinflation and a collapse of the German economy in the early 1920s. In 1923, the German mark was practically worthless, and people had to carry wheelbarrows of money to buy basic goods. This hyperinflation had a devastating effect on the German people, wiping out their savings and pensions and causing widespread poverty and social unrest. The situation stabilized when the German government introduced a new currency, the Rentenmark, backed by mortgages on agricultural and industrial land which restored some degree of confidence in the currency. The German government basically inflated their currency due to excessive debt accumulated from war. The United States has a similar history with wars, relying on the reserve currency status to recover from the economic damage of these wars. However, considering the large economical impact of Russia and BRICS's contribution the the economy, it could be catastrophic due to the current state of the US economy. The BRICS nations (Brazil, Russia, India, China, and South Africa) are exploring the possibility of creating a new reserve currency as an alternative to the US dollar-dominated international financial system. The proposal was discussed at a virtual meeting of the BRICS finance ministers and central bank governors, with a goal to decrease the dependency on the US dollar and increase trade between member countries. However, no specific details were provided yet about the potential reserve currency. _______________________ 📢 Show us some LOVE 🧡 Follow for daily updates and trade ideas on Crypto , Stocks , Forex and Commodities 💎 We thank you for your support ! CryptoCheck
TVC:DXYShort
by CryptoCheck-
53
Key Levels and US Market Review for the Asian session open 9/05European and US markets were relatively tame as traders focus now turns to the CPI data release ahead of the US open Wednesday. The USD found support to move up while Copper and Oil also moved higher on expectations for a lift in demand. Gold edged higher although is showing signs of selling pressure. Expecting a flat open for Asian markets as the Nikkei, ASX200 and Hang Seng were largely rangebound in overnight trading. With stronger economic data comes stickier/resilient inflation so bulls may be getting ahead of themselves as the US Fed will have to think about another rate rise if the CPI continues to show strength. Some KEY ACTIONABLE LEVELS into the Asian market session. Review of the European and US sessions and what that will mean to the price action in the near term along with key levels to watch. Markets covered :- DOW Nasdaq DAX FTSE ASX200 Hang Seng USD Index Gold Oil Copper
NYMEX:CL1!
by TradeTheStructure
💥 WORLD ECONOMY: ...big drop is coming? 😡Amazon rarely delays deliveries, but I ordered the crystal ball over 30 years ago and it still hasn't arrived! 😢😂 ...So, I don't know what will really happen in the coming months, but what we can do right now is try to make some considerations. The chart above represents the DJ Transportation Index , an excellent "thermometer" of US economy. If we look at a monthly time frame, we see that a deep pullback appeared after a structure with "Wave 1 Extension", so we cannot exclude that it could happen again. At the same time however, we see that the Price Action has reached an important static support around 14,000, and only its failure could confirm a bearish leg with a first target around 11,000, obviously we are talking about a monthly chart, so to confirm this hypothesis, we have to wait until the end of the month. In this historical context, many things could change in global economy, and the geopolitical situation is one of the main actors of this period. Inflation, the war in Ukraine, wide social gap, the dollar crisis, are all key factors that could still lead to uncertainty in the medium term. INFLATION and THE PRICE WAR We are well aware that a large part of the developed economy is struggling with rising prices, and even if inflation in the U.S. and in Europe it is driven by different reasons, Central Banks are using the same tools (are they wrong??) of monetary policy, , but something could change in the coming months. The most important Central Bank (Federal Reserve) could face a diabolical "pincer", because the danger of hyperinflation is the same as a potential stagflation. Thanks for your attention. A.B. ❤
DJ:DJT
by TheAnonymousBanker
Key Levels and US Market Review for the Asian session open 8/05Stronger than expected employment data in the US sent bulls into a frenzy and pushed share markets higher into the weekend as recession fears eased. On the flip side, a resilient economy will flow over into inflation and mean that inflation will stay higher for longer and put further upside pressure on interest rates. US Bond yields spiked as to did the USD while Gold nosedived off highs. Copper and Oil found some love from higher expected demand. Expecting a strong open for Asian markets with the ASX200 to open up 70 points, the Hang Seng to open up 130 pts while the Nikkei may open relatively flat thanks to Fridays US market rally. With stronger economic data comes stickier/resilient inflation so bulls may be getting ahead of themselves as the US Fed will have to think about another rate rise if economic data continues to show strength. Some KEY ACTIONABLE LEVELS into the Asian market session. Review of the European and US sessions and what that will mean to the price action in the near term along with key levels to watch. Markets covered :- DOW Nasdaq DAX FTSE ASX200 Hang Seng USD Index Gold Oil Copper
NYMEX:CL1!
by TradeTheStructure
Forex Update: EURUSD struggling at resistance with ECB to comeToday's focus EURUSD Pattern – Resistance stall Possible targets – 1.1165 Upside 1.0965 downside Support – Resistance – 1.1065 Indicator support – ECB meeting MA slope up With the ECB to come, we are focusing on the EURUSD as price continues to be held at 1.1065 resistance. Price has continued to trade in an up trend but, for now, remains held back at resistance that started in April. The ECB could be a short-term catalyst tonight. Rates are expected to be increased by 25 points. The talk is that the ECB could step back as core inflation slowed to 5.6%, and the inflation figure sits at 7%. A larger-than-expected credit drop and tighter leading criteria are other factors that could maintain the trend of small hikes. Another 25-point hike is forecast for June. Another possibility could be a reduction in the balance sheet. QT has already been happening with a reduction in the massive bond holdings. Price-wise, we will need something positive from the ECB to drive the EURUSD higher. Price continues to weaken at resistance, and the USD, another factor, continues to firm today. If the ECB confirms that rates may not rise as much as expected, it could push the EURUSD lower, maintaining resistance. If we see a hawkish surprise in the statement, this could be enough for price to break resistance and start a new leg higher. Don't forget about the USD and tomorrow's NFP. The USD is holding above 100.80 support, and if it can form a solid comeback with a more dovish ECB could set the EURUSD up for a leg lower. Thanks for stopping by. Good trading, and have a great day.
by Eightcap
Is 2024 is the golds, golden year?any break above the resistance line can create sharp increase in the price and push the price higher and higher. the history of chart show that every time the price was successfully braked the resistance line we saw 500 percent increase in the price value. so may be this year be a new golden year for Gold. by pushing the banking sector crisis by the fed hike rate, the probability of soar in the price of commodities and Crypto market is rising.
TVC:GOLDLong
by EQDailytrading
USD/JPY - Yen surges ahead of Fed rate decisionThe Japanese yen continues to show strong volatility, which started on Friday. In the North American session, USD/JPY is trading at 135.14, down 1.04% on the day. The Federal Reserve will announce its rate decision later today, and the markets are confident that the Fed will raise rates by 25 basis points, which would bring the benchmark rate to 5.25%. The markets have priced in a 25-bp hike at 87%, down slightly from the 93% probability earlier in the week.  Investors are expecting today's increase to be a "one and done" which will wrap up the current rate-tightening cycle. The economy is cooling and inflation is easing, which has raised expectations that the Fed will embark on an extended pause and possibly cut rates before the end of the year. One could make the argument that given this economic landscape, the Fed might be better off by pausing rates at today's meeting, but it appears that Jerome Powell is determined to get the inflation genie back in the bottle as soon as possible. Inflation has eased considerably but is still running at a 5% clip, more than double the 2% target. Another factor for the Fed to consider is the re-emergence of the banking sector crisis. First Republic Bank, whose collapse was the biggest bank failure since the GFC in 2008, has had its assets acquired by JP Morgan. That was followed by a plunge in shares of two US regional banks, and there are concerns that another hike today will put even more pressure on the troubled banking sector. The crisis has dampened risk sentiment and the safe-haven yen has been a big winner with sharp gains today. The tightening in credit conditions since the bank crisis began in March is estimated to be the equivalent of a rate hike of between 25 and 50 basis points. That is unlikely to deter the Fed from the expected hike today, but it could be an important factor in future rate policy. USD/JPY is testing support at 135.30. Next, there is support at 1.3450 There is resistance at 137.57 and 138.37
by OANDA
Euro Soars with Dollar WoesOne thing about tables, they turn. This time last year, the dollar was unrivalled. Now, it is being challenged amid a banking crisis, recessionary fears, and a debt ceiling drama. Having stepped up on the rates faster than the rest, the US Fed’s combat against inflation fuelled a dollar rally . It now finds itself between a hard place and a rock. Many expect the Fed to pause. In contrast, the ECB, having been slower off the block, has gradually lifted rates with ample headroom for further policy intervention to fend off a resurgent Euro area inflation. This paper explores fundamental forces driving a rally in the Euro and the headwinds facing the dollar. With EUR/USD making a golden cross on March 27th, this case study posits a long position in Euro using the CME Euro FX Futures delivering a 3x reward to risk ratio with entry at 1.1025 and target of 1.17 hedged by a stop at 1.08. Crushed and Bruised Euro is Fighting Back 2022 was a crushing year for the Euro. Geopolitics plunged Europe into an energy crisis. Bleak prospects plus soaring inflation meant deep recession. The Euro was wounded. The Euro was dealt another blow as the ECB was slow to lift rates. Key eurozone rates were well below those in the US, as the Fed was all pedal to the metal with unprecedented hikes. Higher yields in the US attracted foreign funds, boosting the dollar at the expense of other currencies. Tables turn and times change. Euro's rise is in part thanks to milder European winter. Warmer than normal and prudent energy consumption has kept gas prices in check. The region may well avoid a recession. In fact, it posted a surprise output growth in the final quarter of last year. A hawkish ECB also well supports the Euro. It continues to hike rates to tackle inflation, which remains stubbornly high. As rates in Europe rise while those in US stall, the Euro will attract capital inflows from across the Atlantic. Dollar’s dominance is being challenged Over the last 10 years, the Dollar Index (DXY) has gained ~25% while the EUR/USD has shed ~19%. The rotation away from the dollar is underway. Not only Euros, but the dollar has also been losing ground against other majors, including the sterling and the yen. Easing inflationary pressures should spell victory for the Fed allowing it to tone down its fighting monetary stance. Premium for insuring against US government default spiked to its highest level in more than a decade amid political impasse related to debt ceiling. While this political embarrassment is likely to be inconsequential, the tiny risk of a dollar debacle cannot be ignored. Investors hedging against this risk are likely to push the dollar lower. Is this De-dollarisation? The de-dollarisation camp shouts loud. But ignore the noise. Surely, the weaponisation of the dollar has alarmed nations. Not surprisingly, many are attempting to wean away from dollar dependence for trade settlement. The dollar’s share in forex reserves used to be 71.5% at the turn of the century and has gradually declined to 58.3% as of the end of 2022. The dollar remains at the core of global trade and finance. The dollar forms 88% of FX transactions. Distant second is Euro at 31%, according to 2022 BIS figures (aggregates equal 200% as each transaction involves two currencies). Transactions involving the Chinese yuan having grown at 70% over last three years represents a mere 7% of the total. About 60% of the world's forex reserves aggregating to USD 11 trillion are still denominated in dollar. The dollar will continue to play a pre-eminent role in global trade and as a global reserve for a long time to come. Absent a credible alternative, albeit weakened, the dollar is here to stay. Rate Expectations Point to the Fed Pausing Earlier Than ECB CME’s FedWatch tool shows a 78% probability of another 25bps rate hike at the next meeting on May 3rd and a 67% probability of no rate hike at the June meeting. Fed pause before pivot remains market expectations. Meanwhile, Reuters reported that the ECB is expected to raise rates by 25bps at its next meeting in May. Crucially, ECB survey of professional forecasters points to another 25bps rate hike in Q2 before pausing. Asset Managers & Funds are positioning for Euro to rally CFTC’s Commitment of Traders (CoT) report shows that leveraged funds and asset managers are bullish Euro. Asset managers increased net longs by 7.4% over the last 12 weeks. Leveraged funds have flipped from net short to net long, increasing long positioning by 125%. Meanwhile, the CoT for DXY futures shows that asset managers are still net long but have reduced long positions by 20.5%. Options Market are signalling bullish Euro and bearish Dollar Monthly options on Euro FX futures are trading with a put-call ratio of 0.87 pointing to more calls than puts, indicating Euro bullishness. Euro buoyancy is particularly apparent for June expiry options which have a put-call ratio of 0.6. Meanwhile, thinly traded options on DXY futures expiring in June have a put-call ratio of 1.66 signalling that market participants are bearish dollar with 1.66 puts for every call option. Trade Setup Each lot of CME Euro FX Futures provides exposure to 125,000 Euros. Every 0.00005 increment in the contract represents a trading P&L of USD 6.25. ● Entry: 1.1025 ● Target: 1.17 ● Stop: 1.08 ● Profit at target: USD 8,440 ● Loss at stop: USD 2,810 ● Reward-to-risk: 3x MARKET DATA CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com DISCLAIMER This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services. Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
CME:6EM2023Long
by mintdotfinance
3
Cheap Yen & Low P/E To Deliver Immense Bargains in NikkeiBuying financial assets in dips provides an inbuilt margin of safety. Enriching that trade is a currency that is hovering at its near lowest in a decade. Expected equity gains compounded with Yen that is anticipated to strengthen will strongly propel alpha from the proposed trade setup in Japanese equities. The P/E ratio based on next 12-months earnings in Japan is 13x and cheaper relative to 18x for the S&P500 and 27x for the Nasdaq. The Yen is near its lowest on average based on real-effective exchange rate. It is 2.3x standard deviations below the average over the last decade. For investors looking to hedge their yen exposure, its term structure delivers a positive basis (forward value minus spot price) that can be harvested through hedging. A long position in CME Nikkei/Yen Futures combined with a full currency hedge delivers a 1.9x reward to risk ratio with entry at 29065 and target of 31295 hedged by a stop at 27900. DEMYSTIFYING THE NIKKEI 225 INDEX (“NIKKEI”) The Nikkei index lists 225 largest Japanese firms. Given Japan’s heft, the index is an indicator of Asian market sentiments. The Japanese stock index was previously called Nikkei Dow Jones Stock Average from 1975 to 1985. The name was later changed to Nihon Keizai Shimbun or Japan Economic Newspaper which is commonly referred to as Nikkei. The Nikkei is a price-weighted index with an adjustment factor for each stock. The summation of the adjusted prices is divided by a divisor (29.508) to maintain index continuity. The 225 firms are spread across thirty-five industries. Top fifteen industries form 93% of the index. Top ten firms represent 38% of the Nikkei. Technology, Consumer Goods, Materials, and Capital Goods represent 95% of the index. JAPANESE EQUITIES HAVE BEEN RESILIENT THIS YEAR Japanese equities have delivered 13% gains so far this year with resilience across all sectors. Thanks to Apple and Microsoft, Nasdaq has returned 22% this year as investors seek shelter from ongoing crisis in US banking sector. “Stealth” QE partly explains the outsized gains in Nasdaq. In sharp contrast, S&P500 is up 9%, Dow is up 3%, Russell 2000 is up merely 1% while Chinese equities are down 3%. Positive performance in Nikkei is evident across all sectors and names. Broad based recovery in Japan makes Nikkei far more resilient relative to US equities where superior performance is restricted to no more than a dozen quality names. JAPANESE EQUITIES ARE PRIMED FOR GROWTH Japanese shares continue to inch higher with the Nikkei trading near its highest level in eight months led by earnings optimism and expanded government subsidies for chip production. The prospect of chip makers looks bright after Industry Minister Yasutoshi Nishimura said Japan plans to provide additional subsidies to chipmakers. The P/E based on next 12-months earnings in Japan is around ~13x and cheaper relative to ~18x in the US. For every dollar of earnings, only USD 13 is required to be invested in Nikkei compared to USD 18 in the S&P500 & USD 27 in Nasdaq. Japanese stocks not only trade on low P/E but pay healthy dividends. Nikkei has a yield of 2.13% compared to Dow Jones at 2.09%, S&P 500 at 1.67% and Nasdaq-100 at merely 0.86%. THE YEN IS EXPECTED TO REGAIN ITS HAVEN STATUS The yen is expected to regain its status as a haven currency after years of dollar dominance with the BOJ expected to normalise its monetary policy. The BOJ is anticipated to discard its yield-curve control policy in coming months and that should help strengthen the Yen. Barclays analysts expect the yen to appreciate to 123 per dollar by this time next year. The yen has faced headwinds from higher energy prices and a worsening rate differential as global central banks hiked rates to contain inflation. As energy prices ease and the rate hiking cycles pause, selling pressure on the Yen will soften. If the Fed stops raising rates after a final increase this week, that might lead to inflation-adjusted yield differentials to stop widening in favour of USD. Majority of forecasts have the yen strengthening to levels beyond that implied by the forward market. Analysts are one way on the direction of the dollar-yen. Japanese yen forecast for end-2023 was 125 as of last week, compared to FX forward rate at 129. Analysts at RBC fear that these crowded expectations underplay the impact of recession. US recession spreading to global markets could send the Yen plunging to 150 to the dollar as per RBC. COT REPORTS POINT TO BULLISH SENTIMENTS FOR JAPANESE EQUITIES The CFTC’s Commitment of Traders report (COT) shows positioning by professional investors in Nikkei futures. The report shows open interest segmented into four buckets, namely, (a) Asset Managers (pension funds, mutual funds, & institutional asset managers), (b) Leveraged Funds (hedge funds & money managers), (c) Other Reportables (traders using derivatives to hedge business risk), and (d) Non-Reportables (small speculators). Asset Managers have increased their net long positioning by 278% in Yen denominated futures. Leverage funds have reduced net shorts on Dollar-denominated futures. TRADE SET UP Low P/E ratios, Cheap Yen, Resurgence as a Haven, are among the drivers favouring the Nikkei. A long position in CME Nikkei/Yen Futures with currency fully hedged will deliver a 1.9x reward to risk ratio with entry at 29250 and target of 31295 hedged by a stop at 27900. Every tick represents five index points corresponding to a change of JPY 2,500 per lot. ● Entry: 29065 ● Target: 31295 ● Stop: 27900 ● Profit at target: JPY 1,115,000 ● Loss at stop: JPY 582,500 ● FX hedging gains with CME Micro USD/JPY Futures (Dec 23 contract): JPY 37,200 ● Reward-to-risk: 1.9x MARKET DATA CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com DISCLAIMER This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services. Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
CME:NIYM2023Long
by mintdotfinance
1
Bitcoin PA & US inflation index & FED Rate RisesSo while we wait on the next instalment of the DXY support Group ( FED) and its expected 25 point rise, which may possibly be the last one for now, I post the updated chart of its effect on Bitcoin PA and the US inflation index, which the rate rises are meant to be curbing You will alos note that the rate rises have had a minimal effect on BTC PA really, it has been more the collapse of companies effected by higher interest rates that has knocked confidence int he market in general what some may also notice is how BTC PA is forming a very Bullish CUP pattern beneath the line I have drawn as the line of "recovery" and I expect PA to break above this later on, come back and retest it and then continue its Rise over the course of the next 18 months to 24 months There are a number o f reasons to expect this that include the New Model of Global finance coming int o play with BRICS and the Bitcoin "Halving" , expected Q2 next year but with the increase of Mining operations, this date could be advanced/ Overall, Bitcoin IS doing very well despite many moves to try and destabilise it and has actually outperformed GOLD as a Store of Value. Do not miss teh chance to buy BTC, it may never return to this price range again P>S that is NOT Advice in any form DYOR and do it well
BITSTAMP:BTCUSD
by Orriginal
Analyzing Inflation: COVID-19, Energy, Conflict & LaborInflation, a critical financial and economic indicator, has been significantly impacted by various factors in recent years. This article delves into the influence of COVID-19, changes in work patterns, labor market shifts, energy sector decisions, and the Russia-Ukraine war on inflation, presenting a comprehensive analysis of our present financial landscape. COVID-19 and Supply Chains: A Recipe for Inflation The global pandemic, COVID-19, significantly disrupted supply chains worldwide. With a combination of limited supply and robust or surging demand, the result was inevitable - a price increase, a key driver of inflation. Rising costs of materials, labor, energy, and transportation, all amplified by the pandemic, made goods more expensive to manufacture and transport, further contributing to inflation. The aftermath of these disruptions led to a ripple effect: a rise in supply chain costs. Consumers facing higher prices found themselves with reduced disposable income, which could, in theory, lower demand. However, the essential nature of many goods affected by these disruptions likely negated this potential offset, fueling inflation further. In the long run, these disruptions could lead to persistent inflation. The pandemic has exposed the fragility of 'just-in-time' inventories and the impact of underinvestment in global commodity supply chains, adding to inflationary pressures. Consequently, inflation may become a more permanent fixture, disrupting business planning and forecasting and adding another layer of complexity to the economic environment. Labor Market Shifts: From Crisis to Recovery The pandemic has considerably affected the labor market, resulting in significant shifts and shortages across various sectors. The initial outbreak led to severe job losses, with the global unemployment rate peaking at 13%. However, as economies start to reopen, we're seeing an interesting trend: people voluntarily leave their roles, even as worker demand increases. This labor shortage, induced by changing demographics, border controls, immigration limits, and the call for better pay and flexible work arrangements, presents another challenge in our economic landscape. Furthermore, the acceleration of digitalization and the gig economy could have enduring effects on labor supply and productivity. The crisis has potentially long-term implications, like automation's role in slowing the employment recovery in service occupations. Remote Work: A Double-Edged Sword The rise of remote work, while offering significant societal and economic benefits, also carries potential inflationary effects. Increased demand for houses/apartments, home office equipment, utilities, and other home-centric products and services has led to price hikes, accelerating inflation. Moreover, while remote work has the potential to boost productivity and create new job opportunities, it also brings challenges. Difficulties in collaboration, communication hurdles, and blurred work-life boundaries could negatively impact productivity, painting a more complex picture of remote work's overall effect on productivity and inflation. Energy Decisions: A Balancing Act The decision to reduce investments in nuclear energy and fossil fuels can influence inflation and the overall energy market. A decline in energy production can lead to price increases due to supply-demand imbalances, contributing to inflation. Moreover, reduced domestic energy production may increase dependence on imported energy, which, if more expensive or if international energy prices rise, could also lead to inflation. Transitioning to green energy without adequate investment and planning could lead to shortages and disruptions, driving up energy prices and contributing to inflation. While renewable energy technologies are advancing rapidly, they cannot fully replace the capacity provided by nuclear and fossil fuels in many countries. This could lead to energy shortages and price increases, particularly if the transition to green energy outpaces the technology's readiness. The variability of renewable energy sources, such as wind and solar, presents another challenge. Without adequate energy storage and grid infrastructure investment to manage this variability, energy supply disruptions and price spikes could become more common. Moreover, a rapid transition to green energy could displace existing energy jobs before adequate green energy jobs are created. This could lead to economic instability and potentially contribute to inflation. While the long-term costs of renewable energy can be lower than fossil fuels, the initial investment required to build renewable energy infrastructure can be high. Higher energy prices can pass these costs to consumers, contributing to inflation. In conclusion, while the transition to green energy is crucial for addressing climate change, this transition must be well-planned and well-managed. Policymakers must strike a careful balance between the urgency of climate action and the need to maintain energy security and economic stability. The Russia-Ukraine War: Geopolitical Inflation The ongoing conflict between Russia and Ukraine has also played a role in driving inflation. The war has disrupted the supply of essential commodities such as oil, gas, metals, wheat, and corn, pushing their prices upwards. These nations are major suppliers of these commodities, and their reduced supplies have led to sharp price increases worldwide. Furthermore, the conflict has exacerbated global supply chain disruptions, already strained by the COVID-19 pandemic. This has led to heightened inflationary expectations among businesses and consumers. Additionally, the war has significantly increased oil and gas prices, particularly in Europe, directly impacting inflation and household spending. The war has also weakened global economic confidence, further fueling inflationary pressures. Countries already grappling with financial challenges, such as Lebanon and Zimbabwe, have been severely impacted by the inflationary effects of the Russia-Ukraine war. Overall, the conflict is estimated to add about 2% to global inflation in 2022 and 1% in 2023, compared to pre-war forecasts. Conclusion In conclusion, the dynamic interplay of the COVID-19 pandemic, remote work, labor market shifts, energy sector decisions, and the Russia-Ukraine war has significantly influenced inflation. Policymakers, economists, and businesses must navigate this complex landscape to develop effective strategies that mitigate inflationary pressures while promoting sustainable economic growth. As we move forward, we must continue to monitor these factors to understand their ongoing effects on inflation and the broader economy.
TVC:US10Y
by BitcoinMacro
Swing long GBPUSDHello everyone, My system tells me to swing long GBP towards 1.3 area. With inflation picking up in UK the path of least resistance is up. The fed is cornered and i dont think that any type of hike will help them today. I am expecting 25bps, markets will buy usd and then a dovish speech from powell. If they pause it will be the same. Only if they cut i think that will cause some massive panic and everything will sell off but this is a far fetched idea. Stay safe and cheers!
Long
by Inorogu
2