Trading Insights: Risk to inflation remains on the upside while major indices find support
Risk to inflation remains on the upside while major indices find support
Market Talk
Economic balance in play as Central banks look set to fight high inflation for many more years
US FOMC Projections
| Economic indicator | Current | Longer run beyond 2025 |
|---|---|---|
| Change in real GDP | 2.7 | 1.8 |
| Unemployment rate | 3.4 | 4.5 |
| Inflation | 6.4 | 2 |
| Federal funds rate | 4.75 | 3.1 |
Souce: Fed reserve December 14, 2022 economic projections
The US could avoid a deep recession as data suggests that there are few signs that the economy is overheating, and a strong jobs market reduces the risk of a deep recession.
- Fed dot plot suggests rates to hit 5.1% during 2023 before falling to 2%
- Looks like inflation will remain higher for longer; at least till 2025
- Employment market to remain strong even if unemployment increases +1% from the current historic lows
Today’s Economic Events
US durable goods orders on deck: Could investors see a weaker durable goods orders outcome as a positive?
- A deceleration of durable goods orders could imply that lower goods prices may follow in the coming months
- Lower goods prices could be viewed by investors as deflationary
- This would Increase the odds for the Fed to reach its 2025 2% inflation target
| Time: GMT+0 | Country/Region | Economic Indicator | Previous | Forecast | Actual | Units |
|---|---|---|---|---|---|---|
| 12:30:00 AM | Australia | Companies Gross Operating Profits % SA Q/Q | -12.4 | 1.8 | 10.6 | % |
| 7:00:00 AM | Sweden | Retail Sales y/y | -8 | - | -7.5 | % |
| 1:30:00 PM | US | Durable Goods New Orders m/m | 5.6 | -3.9 | - | % |
| 3:00:00 PM | US | NAR Pending Home Sales | 76.9 | - | - | - |
Cross-asset commentary
S&P 500 Index finding price support in front of today’s US durable goods orders?
S&P 500 Index: 3,900 seen as the next key support provided price fails to hold above the 3,950 level; short-term upside resistance seen near 4,060s, which if price can manage to clear opens up the prospect for a restart of the December 22, 2022 - February 02, 2023 uptrend.
EUR/JPY: the strong close on Friday to build the case for keeping the uptrend alive?
EUR/JPY the stronger close on Friday (Feb 24th, 2023) strengthens the case for a continuation of the multi-week uptrend; prospects for a further advance towards 144.5 can not be ruled out provided price can remain above the 143 previous resistance now turned support.
Not investment advice. Past performance does not guarantee or predict future performance.
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