Last Friday’s “goldilocks” US jobs report – robust hiring accompanied by moderating earnings growth – has fuelled hopes that the Fed can truly engineer a “soft landing” for the world’s largest economy.
Such expectations are set to frame this week’s closely-watched US inflation print, amongst these other economic data releases and events across major economies:
Monday, January 9
Tuesday, January 10
Wednesday, January 11
Thursday, January 12
Friday, January 13
Overall, the US dollar could be dragged even lower if the headline inflation figure confirms the ongoing downtrend in price pressures.
After all, if inflationary pressures, a.k.a the Fed’s enemy #1, is losing its potency, then the US central bank would have less reason to keep hiking interest rates aggressively.
Wall Street economists estimate that the December consumer price index (CPI) rose by “only” 6.5%.
If so, that 6.5% figure would be:
For the cautious investor, 6.5% still marks more than three times the Fed’s official 2% target.
Yet the dollar is set to get more downcast if the pace of the headline CPI’s downtrend gathers steam.
USD Index tests critical support as 50-day SMA threatens to cross below 200-day SMA
At the time of writing, the USD Index is testing a crucial Fibonacci level for support, with the 1.7085 level marking the 38.2% retracement line from 2022’s peak to trough.
A lower-than-6.5% CPI print later this week may see this equally-weighted USD Index submerging into sub-1.16 territory for the first time since August, while likely sealing a “death cross” – where its 50-day simple moving average (SMA) crosses below its 200-day counterpart.
Such a technical event often signals more price declines, which may compound the US dollar’s pains as we progress through 2023, provided the Fed truly eases up on its hawkish stance, and perhaps even embarks on a policy pivot (rate cut) later this year.