The GBP is the strongest major currency for the second day in a row. The JPY is the weakest, closely followed by the USD which was also weaker yesterday. Stocks are up today, helped by hopes of China reopening in Shanghai as Covid cases are zero in the quarantine zone for the 3rd day. The news also drove oil prices higher on expectations of increased demand in China on any reopening momentum. Damage caused by supply constraints on inflation

Inflation

Inflation is defined as a quantitative measure of the rate at which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general price level where a given currency is effectively buying less than it has in previous periods. In terms of valuation of strength or currencies, and by extension foreign currencies, inflation or its measures are extremely influential. Inflation stems from the global creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply relative to the wealth produced (measured with GDP). This thus generates demand pressure on a supply that is not increasing at the same rate. The consumer price index then increases, generating inflation. How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels. This includes purchasing power parity, which attempts to compare the different purchasing power of each country according to the general level of prices. By doing so, it helps to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates in the forex market. Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on the exchange. Conversely, too low inflation (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the foreign exchange market.

Inflation is defined as a quantitative measure of the rate at which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general price level where a given currency is effectively buying less than it has in previous periods. In terms of valuation of strength or currencies, and by extension foreign currencies, inflation or its measures are extremely influential. Inflation stems from the global creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply relative to the wealth produced (measured with GDP). This thus generates demand pressure on a supply that is not increasing at the same rate. The consumer price index then increases, generating inflation. How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels. This includes purchasing power parity, which attempts to compare the different purchasing power of each country according to the general level of prices. By doing so, it helps to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates in the forex market. Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on the exchange. Conversely, too low inflation (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the foreign exchange market.
Read this term from China, are replaced by more supply problems in the oil market, both of which are bad for inflation. However, some relief is observed on the wheat and corn market. Wheat futures prices were borderline yesterday. Both are trading lower today.

U.S. Fed officials, including Fed Chairman Powell, are scheduled to speak today (Powell speaks on inflation at a WSJ event at 2 p.m. ET). Other Fed officials scheduled to speak today include Bullard, Harker, Mester and Evans. Bullard and Mester are voters this year. Most/all Fed officials are on board for 50 basis points in the next meeting or two. Bullard expressed that he would like to see the Fed Funds rate rise to 3.5% by the end of the year. This trajectory implies a rise of 50 BP in each of the 5 remaining meetings in 2022 (he is the most hawkish).

Today, late in the hour, Retail Sales will be seen with expectations of 0.9% headline (0.4% base). Capacity utilization and industrial production will be released at 9:15 a.m. ET. The National Association of Home Builders index will be released at 10 a.m. along with business inventory data.

US and European stocks are higher. US and European yields are higher. The German 10-year goes back above 1.0%. Gold is up for the second day in a row, helped by the weakness of the dollar.

In Ukraine, defenders of the Azovstal steelworks in Mariupol have laid down their arms in surrender as Russia completes its assault on the city and consolidates the path to Crimea.

A look at the markets shows:

• Spot gold is up $10.22 or 0.56% at $1,834.30.
• Silver is up $0.14 or 0.64% at $21.75
• WTI Crude Oil is trading around $115. It’s about $0.75
• Bitcoin is trading above $30,000 to $30,413, up $680 or 2.29%

In pre-market US equities, major indices are trading higher (in line with their futures) after yesterday’s mixed results where the S&P and NASDAQ fell while the Dow made a small gain.

• Dow Industrial Average up 363 points from yesterday’s 26.76 points
• S&P index up 58 points after yesterday’s -15.88 point decline
• NASDAQ up 222 points after yesterday’s -142.21 point decline

On the European equity markets, the main indices are trading higher:

• German Dax up 1.5%
• The French CAC up 1.3%
• Britain’s FTSE 100 up 0.8%
• The Spanish ibex up 1.3%
• Italian FTSE MIB +1.4%

In the US debt market, yields are trading higher across the yield curve:

In the European debt market, yields are also pushing higher with the German 10-year yield

Yield

A yield represents the income generated by an investment or security over a certain period of time. Returns are usually displayed in percentage terms and come in the form of interest or dividends received. These figures do not include price changes, which separate them from the total return. Therefore, a yield applies to various stated rates of return on stocks, fixed income instruments such as bonds, and other types of investment products. Returns can be calculated as a ratio or internal rate of return, which can also be used to indicate the owner’s total return or a portion of income. Why are returns important? At any time, all financial instruments compete in a public market. Returns analysis is one of many measures used by analysts and investors and reflects a singular part of the total return of holding a security. For example, a higher return allows the owner to recoup his investment sooner and thus mitigates risk. By extension, a high return may have resulted from a decline in the security’s market value due to higher risk. Yield levels are also influenced by inflation expectations. Fears of higher levels of inflation in the future suggest that investors would ask for a high yield or a lower price relative to the coupon today. The maturity of the instrument is also one of the elements that determines the risk. The relationship between yields and the maturity of instruments of similar creditworthiness is described by the yield curve. Instruments on longer intervals generally have a higher yield than short-term instruments. The yield of a debt security is generally linked to the creditworthiness and probability of default of the issuer. The higher the risk of default, the higher the return would be in most cases since issuers must offer investors some compensation for risk.

A yield represents the income generated by an investment or security over a certain period of time. Returns are usually displayed in percentage terms and come in the form of interest or dividends received. These figures do not include price changes, which separate them from the total return. Therefore, a yield applies to various stated rates of return on stocks, fixed income instruments such as bonds, and other types of investment products. Returns can be calculated as a ratio or internal rate of return, which can also be used to indicate the owner’s total return or a portion of income. Why are returns important? At any time, all financial instruments compete in a public market. Returns analysis is one of many measures used by analysts and investors and reflects a singular part of the total return of holding a security. For example, a higher return allows the owner to recoup his investment sooner and thus mitigates risk. By extension, a high return may have resulted from a decline in the security’s market value due to higher risk. Yield levels are also influenced by inflation expectations. Fears of higher levels of inflation in the future suggest that investors would ask for a high yield or a lower price relative to the coupon today. The maturity of the instrument is also one of the elements that determines the risk. The relationship between yields and the maturity of instruments of similar creditworthiness is described by the yield curve. Instruments on longer intervals generally have a higher yield than short-term instruments. The yield of a debt security is generally linked to the creditworthiness and probability of default of the issuer. The higher the risk of default, the higher the return would be in most cases since issuers must offer investors some compensation for risk.
Read this term trading above 1.0%.