European and US stock futures are trading lower because of inflation fear. Investors are ignoring all the positive news such as the US stimulus which got the green light over the weekend and the strong US NFP data.
The US economy is on the right path and the evidence of this came on Friday when the US NFP data dropped many jaws. There was nothing in the data that said that the US economy is not thriving. The US economy is gathering momentum thanks to the reopening of restaurants and bars and going into Spring, we are likely to see an even better picture.
The optimism around the US NFP made the US dollar hit a new high on Friday, and the uptrend is highly likely to continue this week as well. We can see the evidence of this by focusing the performance of the dollar index against the G10 currencies. (more on currency strength)
The Big Question
The big question from here onward is going to be what does this mean for the reflation trade?
There is no doubt that the number has confirmed the optimism that the Federal Reserve’s Chairman has showed in his recent public appearance–unemployment will continue to improve.
However, he has balanced all that optimism by bringing to light a stark reality that we are still far from reaching our target of full unemployment and even achieving that target does not mean that the Fed will change its monetary path.
However, the situation is no longer the same. Traders have stopped believing in what the Federal Reserve is saying. They know that the day is not far away, when the Federal Reserve will change its stance on the monetary policy, and that is: tapering the asset purchase program, and higher interest rates.
The inflation trade is very much going to be the focus among investors and traders today especially after the positive news that we received over the weekend about Joe Biden’s $1.9 trillion stimulus package.
The fact that the Senate has approved the relief package, and now the bill is going back to the house for final approval before it appears on the president’s desk for a signature, means that the US economic recovery is about to shift into another higher gear.
As for the crypto market, Bitcoin has been very much in a consolidation pattern over the weekend. We did not see any crazy moves apart from the fact that the Bitcoin price moved above the 100, 50, and 200-day simple moving averages on the four-hour timeframe.
The sentiment still seems to be very positive when it comes to Bitcoin trading as we are seeing consistent support from corporates and institutions. One particular cryptocurrency which could see massive bounce in the coming days is Ethereum.
The cryptocurrency had unlimited supply but that is about to change and this means Ethereum’s price could be in for some significant upward moves. NFT’s are other areas of interest among investors. Jack Dorsey is offering to sell his first tweet as an NFT.