Inflation roars and King Dollar snores even as interest rates rise.
The dollar, which has fallen for three straight sessions, gave up gains after the US Federal Reserve announced sharp rate hikes in the coming months. The dollar fell to its lowest level against the euro since November.
INFLATION TRANSITION IN DECEMBER: WHERE WILL PRICE INCREASE HIT AMERICANS HARDEST?
|UUP||INVESCO DB US DOLLAR INDEX BULLISH FUND – USD ACC||25.50||+0.07||+0.28%|
|UDN||POWERSHARES DB US DOLLAR BEARISH FUND||20.34||-0.07||-0.34%|
Consumer prices rose 7% in December, the highest since 1982, while producer prices rose 9%, the largest annual increase since the data was first calculated in 2010.
The dollar appears to be faltering which could be an early sign that investors are losing confidence in the US economy and that alone could make our inflationary situation worse.
INFLATION LEADS ‘THE BIG RESIGN’: FMR. WALMART EXEC
|USE||UNITED STATES OIL FUND LP||59.97||+1.70||+2.92%|
|ROTTEN||UNITED STATES NATURAL GAS FUND LP SHARE (POST REV SPLIT)||14.17||-0.03||-0.21%|
Oil is up due to falling global oil supplies as well as the falling dollar, and natural gas is up due to LNG exports but mostly due to freeze and freeze.
The most direct correlation would be the commodity price. On the world market, almost all major commodities from the fields of energy, agriculture and metals are traded in dollars. If the dollar falters, it would cost more dollars to buy the same amount of goods. That means this blockbuster rise in consumer prices could look small going forward.
|GLD||SPDR GOLD SHARES TRUST – EUR ACC||169.67||-0.49||-0.29%|
If the dollar falters, the Federal Reserve could be forced to take even more drastic measures to slow the rise. Instead of four or five quarter-point rate hikes, policymakers could be forced to shock and impress the market with a series of hikes of a full point or more to protect the dollar’s integrity.
This potential looming crisis of inflation and confidence in the dollar shows that money printing and runaway government spending have consequences. It also has major implications for President Biden’s aspirations to “build better again.”
When the dollar is weak, not only does it take more dollars to better rebuild, but the emergence of even more government debt to fund programs that would bring the economy back to growth is not only a recipe for inflation, but a Setback the dreaded stagflation.
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Phil Flynn is a Senior Energy Analyst at The PRICE Futures Group and a contributor to Fox Business Network. He is one of the world’s leading market analysts, providing retail investors, professional traders and institutions with up-to-date investment and risk management insights into the global oil, gas and energy markets. His accurate and timely forecasts are in high demand by industry and media worldwide and his impressive career spans almost three decades, attracting attention with his market talks and energetic personality as a writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or email at [email protected].