DOLLAR - Back for good or temporary? (INFLATION WILL BE KEY🔑)

11 gen 2021

Well guys we will find out soon, on Wednesday.

Last Friday we were all bombarded with headline news for poor jobs (NFP) but we did not neglect to take into account 2 things:

a. unemployment rate dropped (good for dollar) - important
b Average hourly Earnings rose by 0,8% (vs 0,2% forecast) - VERY IMPORTANT!!!

Why was average hourly earnings so important?
Well first let's understand what Average Hourly Earnings is:

It is the change in the price businesses pay for labor. When the Actual is greater than 'Forecast' is good for currency. It means this - INFLATION!

WAGES GROWING = INFLATION
Inflation right now IS GREAT NEWS FOR CENTRAL BANKS!
Why?
Well let's keep it simple: If they owe 70 trillion dollars (for example) and the economy is worth say 10 trillion dollars, they would prefer the economy to be worth 20 trillion dollars because that way the debt becomes a smaller percentage of the wealth. More controlable.

So what happens next??


Well, if last Friday we had inflation (headlines were misleading you all on the poor jobs but we didn't get tricked) then on Wednesday we have the BIG inflation numbers coming out:

CPI and CORE CPI coming out in 2 days :
Change in the price of goods and services purchased by consumers;
Usual Effect 'Actual' greater than 'Forecast' is good for currency;
Consumer prices account for a majority of overall inflation. Inflation is important to currency valuation because rising prices lead the central bank to raise interest rates out of respect for their inflation containment mandate;

Got is guys? Inflation is KEY 🔑

Want some more?
On Wednesday we will also know the Federal Budget Balance (Difference in value between the federal government's income and spending during the previous month).

In other words, have fun struggling with these markets conditions until Wednesday. After that, things will be crystal clear.