U.S. Retail Sales Could Refuel The Dollar’s Rally
XM Group | Nov 15, 2021 11:18AM ET
Inflation soars, dollar roars
With US inflation reaching its fastest pace in three decades, investors are betting that Fed officials will have to hit the normalization button sooner. The transitory narrative is slowly melting away, with even the Fed admitting this episode will probably last longer than expected.
Of course, price pressures are likely to cool next year as the supply disruptions start easing and more energy production comes online. The real question is, will inflation decline towards the Fed’s 2% goal, or will the American consumer and powerful government spending prevent that from happening?
On the flipside, a disappointment in the upcoming data might spark a relief rally. In this case, the 1.1525 region could provide initial resistance, ahead of the 50-day moving average currently at 1.1636 and the downtrend line.
Beyond macroeconomics factors, let’s not forget that the dollar also offers protection against drawdowns in stock markets, which may prove useful in this environment.
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