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Outlook: The pullback Tuesday included some violent whipsaws on the hourly basis but little change in the end. Today the main news event is the Bank of Canada and whether it obeys the wishes of the market and does 25 bp and announces a pause.

It’s possible the surprise revival of inflation in Australia might give all the central bankers a headache. It shows that inflation can come back, like the flu. The current thinking is two more rate hikes, at least.

See the chart from Trading Economics. It doesn’t matter whether statisticians can quibble about technique about data validity–once the world see the new number, the central bank background worry about “repeating” inflation looks real. This has not upset the apple cart just yet, but “should.” That means happy talk about ending hikes and getting cuts later this year might be shown to be invalid wishful thinking.

Another issue becoming increasingly clear is that we see recession in some places (housing, manufacturing) but no recession elsewhere (many services). The truth of the matter is that we are dealing with a new kind of cycle and some questionable data that may or may not be reliable. Some big shot bankers are sure of recession in the US (and Europe) while some economists disagree and think we can get a soft landing. This is the market vs. the Fed and the economists. We get GDP for Q4 tomorrow and the beginning of the Atlanta Fed’s Q1 GDPNow forecasts. We bet the economists win.

That doesn’t mean we can’t get a crushing contraction in Q2, but for the moment, forecasts of big, terrible crashes in the S&P and the dollar are overdone.

Tidbit: As an antidote to the shame and unhappiness of a near coup and mass shootings, check out this YouTube. It pops up from time to time and is worth watching every time.

Note to Readers: There will be no reports for the week starting Monday, Jan 30 to Feb 3.


This is an excerpt from “The Rockefeller Morning Briefing,” which is far larger (about 10 pages). The Briefing has been published every day for over 25 years and represents experienced analysis and insight. The report offers deep background and is not intended to guide FX trading. Rockefeller produces other reports (in spot and futures) for trading purposes.

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This morning FX briefing is an information service, not a trading system. All trade recommendations are included in the afternoon report.

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