Markets: Is the Phillips Curve dead or merely resting? - Westpac

Sandeep Kanihama FXStreet Contributor

According to David Goodman, analyst at Westpac, the big question for the markets at the moment is whether the Phillips curve is dead or merely resting?

Key Quotes

“As the post-crisis recovery continues, many economies have seen low levels of unemployment through 2018 without a material wages response. US labour market is showing some nascent signs of wages growth as the unemployment rate moves to 40+year lows, but we have seen what would have previously been considered sub-NAIRU rates of unemployment in UK, Germany, Canada and indeed Australia and NZ without wages really accelerating.”

“Low wages growth has been (partly) explained by globalisation; technology; job insecurity; risk aversion, low inflationary expectations, declining unionisation and even monopsony and the rise of “superstar” firms. The key question for markets is whether globalisation and digitisation has permanently changed this relationship, or are the lags just slightly longer?”

“For now it seems clear that “full employment” levels are lower than previously assumed and unemployment rates may need to decline further than historical experience would suggest before spurring a material rise in wages. Watch for any signs of wages pressure which would boost inflation profiles and thus challenge the broadly accommodative monetary policy backdrop which currently underpins markets.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

EUR/USD trims gains, hovers around 1.1900 post-US data

EUR/USD trades slightly on the back foot around the 1.1900 region in a context dominated by the resurgence of some buying interest around the US Dollar on turnaround Tuesday. Looking at the US docket, Retail Sales disappointed expectations in December, while the ADP 4-Week Average came in at 6.5K.

GBP/USD comes under pressure near 1.3680

The better tone in the Greenback hurts the risk-linked complex on Tuesday, prompting GBP/USD to set aside two consecutive days of gains and trade slightly on the defensive below the 1.3700 mark. Investors, in the meantime, keep their attention on key UK data due later in the week.

Gold loses some traction, still above $5,000

Gold faces some selling pressure on Tuesday, surrendering part of its recent two-day advance although managing to keep the trade above the $5,000 mark per troy ounce. The daily pullback in the precious metal comes in response to the modest rebound in the US Dollar, while declining US Treasury yields across the curve seem to limit the downside.

AI Crypto Update: BankrCoin, Pippin surge as sector market cap steadies above $12B

The Artificial Intelligence (AI) segment is largely on the back foot with major coins such as Bittensor (TAO) and Internet Computer (ICP) extending losses amid a sticky risk-off sentiment.

Dollar drops and stocks rally: The week of reckoning for US economic data

Following a sizeable move lower in US technology Stocks last week, we have witnessed a meaningful recovery unfold. The USD Index is in a concerning position; the monthly price continues to hold the south channel support.

XRP holds $1.40 amid ETF inflows and stable derivatives market

Ripple trades under pressure, with immediate support at $1.40 holding at the time of writing on Tuesday. A recovery attempt from last week’s sell-off to $1.12 stalled at $1.54 on Friday, leading to limited price action between the current support and the resistance.