US inflation figures have consistently come in hotter than expected since the start of the year, every data release increasing fears that interest rate cuts may be pushed further and further down the line. Such fears were all but confirmed on Tuesday during a press conference in Washington, during which Federal Reserve Chair Jerome Powell admitted that the inflation numbers seen so far have not instilled any degree of confidence to end restrictive monetary policy. Powell stated in no uncertain terms that “if higher inflation does persist, we can maintain the current level of restriction for as long as needed”. US jobless claims drop tomorrow, offering further clues about the state of the labour market.
The prospect of higher rates for longer continued to push the Dollar to even greater strengths early this week, the DXY briefly touching 106.5 yesterday. The hardest hit continued to be the Japanese Yen, with USDJPY already approaching the 155 level, up from 153 at the weekly open. There’s a growing sentiment that the Bank of Japan will be forced to step in at some point to protect the Yen, although there has been no official announcement as of yet. Japanese inflation figures are set to be released on Friday, which may offer some clarity to the situation.
Gold started the week strongly, gaining 1.7% on Monday and setting yet another record close at $2,382 an ounce. Despite some chop yesterday that level was maintained to close the day flat. Early trading this morning does not particularly suggest one direction or another.
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