There were a pair of economic reports this week:
- The Producer Price Index by Commodity (PPIACO): -0.72% month over month (m/m), +9.07% year over year (y/y). Producer price inflation is falling – it is less than half of what it was at the peak (23%) in October, 2021.
- Durable Goods: Orders +1.06% m/m, New Orders: +0.61% m/m, shipments: +0.41%. New highs for everything. Positive.
No recession visible from this data; the falling PPI is probably driven by the plunging crude oil prices over the last 12 months – down $50-$60 from the high.
Rates were mixed this week: the one and three month rates fell, while the longer rates ticked higher. The market/CME (Source) is projecting a 78% chance of a 50 basis points increase at next week’s Fed meeting, and a 22% chance of a 75 bp increase. The labor market has not yet fallen apart – it remains relatively tight. I’m guessing that’s due to the hangover from the initial wave of disability from the 46 million people who signed up for the 8-mouse booster. See injury frequency at the ICAN (V-Safe) dashboard (Source – ICAN): 33% reported “unable to perform normal activities/missed work or school/required medical care.” Maybe that’s why 15% of the first-shot-vaxxed never got shot #2. (268 million Americans got dose #1, while 228 million received #1 and #2).
So, my current gut feeling: Powell will stay the course, in terms of his not-pivoting during next Wednesday’s press conference (at 14:30 Eastern). Market is predicting a 50 bp increase at the following (Feb 1 2023) meeting, although only with a 49% chance. So. 50 bp now, and 50 bp later, which puts Fed Funds just under 5% by early Feb.
The buck tried to rally this week, but mostly failed, up just 0.30 [+0.29%] to 104.80. To me it looks like the buck is struggling to put in a low here after falling nine points in nine weeks. The weekly/monthly downtrend remains in place.
In spite of the dollar’s slight rise, gold rose too, up 8.10 [+0.45%] to 1810.70. Gold fell early in the week, and spent the rest of the week rallying, managing to close back above the 200 MA. Gold also made a new 5-month high this week as well.
by davefairtex 
