FOREX Fundamental analysis on August 10, 2022.
The markets are waiting for the release of the US inflation release, which is able to disperse the volatility of currency pairs and determine EUR/USD with the direction of movement, since the pair is frankly stagnant in the range of 1.01-1.03.
In fairness, we can say that forex currency trading was waiting for the same reaction from Friday's Non-farm Payrolls, but even a super-powerful job gain of 528 thousand could not move trading assets.
But, on the other hand, the inflation report is the determining driver of the Fed's policy, while the labor market only confirms the correctness of the chosen course of monetary policy.
The average wage in the US is growing, which, of course, pleases the FOMC representatives. However, apparently, the United States is facing an inflationary spiral, when prices force employers to raise the wages of employees and at the same time the cost of their own products or services. This is an endless race that the regulator must stop.
At the same time, NFP will reduce the risks of inflation at least in the near future, despite the inversion of the yield curve. BofA believes that the curve may sink even deeper, to the lows of the 80s of the last century, when the Fed had to raise the rate to 20% to beat inflation, which soared to 14.8%.
The stock market is not particularly concerned about the problems of the economic downturn. An increase in the capitalization of the S&P 500 by $ 5 trillion. raises the question, is this the beginning of a new "bullish" trend? Analysts do not have time to rewrite forecasts for the stock market, and I must say, they are often radically opposite.
Bloomberg expects US consumer prices to decline from 9.1% to 8.7% (YoY) or from 1.3% to 0.2% (mom) in July. At the same time, core inflation, which does not take into account the cost of energy and food, will grow from 5.9% to 6.1% (YoY), but on a monthly basis will show a decline from 0.7% to 0.5%.
In my opinion, it is unlikely that inflation will slow down sharply from last month's records. But even if this happens, EUR/USD buyers will receive only short-term support, so any upward movement of the pair to 1.03 or 1.0355 should be used to form meek positions. If the report shows an increase in indicators, then the pair's sales in the direction of 1.01 and 1.00 will strengthen.