Things just won’t be the same – This could be the conclusion of the European Central Bank annual forum in Sintra, Portugal. ECB President Christine Lagarde said that she doesn’t think “that we are going to go back to that environment of low inflation.” Federal Reserve Chair Jerome Powell explained how forces including globalization, aging demographics, low productivity and technological developments are no longer keeping prices in check. “We’re learning to deal with it” Powell said.
Lagarde reckoned the shifting era will herald yet more upheaval and “will probably change continuously towards a system that we are not certain about”.
“We’ve lived in that world where inflation was not a problem,” Powell said. “I think we understand better how little we understand about inflation.” These are the words of a central bank head.
In other words, and in the way we see it, this could mean for the Western world that we will learn to deal with surging consumer prices, threats to economic growth and the possibility of further energy disruptions.
EUR/USD: The pair headed south towards 1.04. Focus shifts back to a potential bearish break of 1.0340. Next targets are 1.02 and 1.00. A current resistance remains intact at around 1.06.
GBP/USD: Below 1.24, bears are in control with the focus turning to a potential test of 1.19.
DAX: If the index remains below 13300, we expect a fall towards 12700.
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