Friday, December 23, 2016

Dollar's Jump To Boost EU And Japan's Next Inflation Reports

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*The dollar jumped 4% versus the Euro in November and 9% versus the yen. Both inflation numbers are going to report soon.

*These moves elevate import prices to the EU and Japan driving inflation higher.

*Inflation is 6-12 months away from hitting central banks' 2% target. At that time, they will need to reverse course from this record-easing period.

*We're not there yet but when we arrive there, markets have material risk.

How Fast Will Inflation Jump In One Month Due To The Dollar?
EU
The dollar was up about 4% in November versus the euro (NYSEARCA:FXE).
14% of EU's imports are from the US. 40% of EU's GDP is made up of imports.
Now let's do the math.
EU: 4% dollar move X 40% imports X 14% of those imports from the US = .2% move.
In one month, the dollar alone drives EU inflation .2% sequentially. That would be an acceleration from the previous month from the dollar alone.
Source: Trading Economics

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