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Global payments company: GBP may benefit from elections due in the second half of the year

Global payments company Argentex says 2024 will be marked by further resilience for the pound and could benefit from elections due in the second half of the year.
In a research report setting out forecasts and scenario analysis, Joe Tuckey, head of foreign exchange analysis at Argentex, said that the 2024 elections in the United Kingdom and the United States will have a significant impact on the foreign exchange market.
"In the UK, Labor's indication that they will integrate more closely into Europe is seen as a potential positive for the pound," he said. "With a general election approaching, possibly in the autumn, certain sterling-positive themes may emerge and be priced in," he added.

For analysts, Trump's return could re-disturb the relative calm of the Biden era, and U.S. markets could become more volatile.
"Markets could become particularly concerned if Trump insists on withdrawing from NATO and withdrawing support for foreign wars, thereby putting more fiscal pressure on other economies," he explained.
Argentex's base-case GBP/USD forecast for 2024 suggests that the pound will continue to maintain its recent resilience, gradually rising as the dollar weakens.
The Bank of England will maintain a more dovish stance than the Fed, while economic data is likely to remain "flat" but in line with expectations for modest economic growth in 2024 of 0.5% to 1%.
"The UK will once again successfully avoid the annual doom and gloom narrative as falling interest rates, falling inflation and low unemployment continue to drag on the post-Brexit recovery," Tuckey said.
(Image source: Argentex)
Argentex's base case forecasts GBP/USD in a range of 1.30-1.33.
However, if inflation remains higher in the UK, which could mean the Bank of England cuts interest rates later and to a smaller extent than some other G10 central banks, then a bullish scenario of 1.35-1.37 could emerge.
A pessimistic scenario could lead to 1.18-1.20. This scenario could involve a major economic slowdown and a bond sell-off as markets question election-related fiscal changes.
Regarding the outlook for the GBP/EUR exchange rate, Argentex believes that the broad fundamental drivers in both countries are likely to remain similar, with growth expectations ranging from +0.5% to 1%.
(Image source: Argentex)
With deflation heading steadily toward 2%, the central bank is expected to cut interest rates through 2024. Economic data can be a complex picture, depending on employment, energy prices, consumer behavior and global demand themes.
"The Bank of England is leaning towards being less dovish and the ECB is likely to remain, while there could be an election rally later this year," Tuckey said.
Argentex expects GBP/EUR to trade in a range of 1.15-1.17, but if the 'sticky' inflation scenario mentioned above emerges, a bullish scenario of 1.18-1.19 is possible.
Another bullish scenario would see a new Labor government drive sterling higher amid "replacement" and "market-friendly" pricing, Tuckey said.
A pessimistic scenario would lead to 1.12-1.14 as the ECB is unable to deliver as many rate cuts as the market expects.
"The euro will strengthen as underperforming economies such as Germany start to outperform downturn expectations," Tuckey said.

Japan CPI inflation falls as expected in Dec, points to ultra-dovish BOJ

Investing.com-- Japanese consumer inflation eased as expected in December, furthering bets that the Bank of Japan will keep its ultra-dovish policy largely unchanged when it meets in the coming week.
Core consumer price index (CPI) inflation, which disregards volatile fresh food prices, rose an annualized 2.3% as expected in December, data from the Statistics Bureau showed on Friday. The reading fell further from the 2.5% seen in November.
The core CPI index was also at its lowest level since July 2022.
A core reading that disregards both fresh food and energy fell to 3.7% from 3.8% in the prior month. The reading is closely watched by the BOJ as an indicator of underlying inflation, and was now well below a 40-year peak hit in 2023.
Headline CPI inflation fell to 2.6% in December from 2.8% in the prior month.
Softer fuel and utility prices were the key drivers of easing inflation, while food prices continued to grow at a rapid pace. Utility prices were also brought lower by government subsidies on electricity and gas, which were introduced in 2023 to help curb inflation.
Friday’s reading gave further credence to expectations that the BOJ will keep its ultra-dovish policy unchanged when it meets this coming Tuesday. Easing inflationary pressures and recent signs of sluggish wage growth give the BOJ little urgency to begin tightening policy.
The central bank is also expected to hold its ultra-dovish course amid uncertainty after a devastating earthquake at the beginning of the year. Rebuilding and stimulus measures in the wake of the disaster are widely expected to offset any monetary tightening by the central bank.
The BOJ is set to decide on monetary policy on Tuesday.
Still, increased fiscal stimulus may push up Japanese inflation in the near-term. Renewed weakness in the yen through January may also elicit a stronger inflation reading for the month.
The yen traded sideways after Friday’s inflation reading, but was close to its weakest levels since early-December.
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Occidental Petroleum sounds supply alarm: global oil shortage expected in 2025

Tongcaijing APP has learned that Vicki Hollub, CEO of the US oil and gas giant Occidental Petroleum Company (OXY.US), said at the World Economic Forum in Davos, Switzerland, on Tuesday local time that if global oil exploration activities continue to fail to keep up with market demand, , the global oil market may face a sharp shortage of oil supply starting in 2025.

"In the short term, the oil market is also unbalanced, but tends to be oversupplied," Hollub said. "But the imbalance between supply and demand may still occur in 2025 and beyond, and the world may be experiencing an oil supply shortage."

The CEO explained that from the mid-1950s to the late 1970s, global oil companies discovered approximately five times more oil than they consumed, but by 2023 this had steadily declined to just around 25% .

According to Hollub, U.S. oil companies have shifted from exploration to focusing on extracting shale oil reserves since 2012. However, the overall life of U.S. shale oil reserves is much shorter than conventionally produced oil.

Hollub warned in an interview that the oil market will completely shift from a short-term oversupply situation to a long-term oil supply shortage situation where the world needs more oil.

The crisis in the Middle East is difficult to break, will international crude oil prices continue to rise?

Since the Palestinian Hamas organization attacked Israel in early October, tensions in the Middle East have continued to escalate, and the situation has become even more complicated after the United States and the United Kingdom air strikes on Houthi armed strongholds. The price of Brent crude oil, the international crude oil benchmark, tends to fluctuate, sometimes rising strongly and sometimes weakening sharply, mainly due to market hesitation. Some traders once believed that the situation in the Middle East was close to calming down and would not interfere with the trend of oil prices. Others There are fears there will be more disruption to shipping and that the conflict could expand into a wider regional conflict.

Chevron CEO Michael Wirth recently stated at the Davos Forum that the Red Sea crisis has brought serious risks to the liquidity of petroleum products. If tensions lead to serious supply disruptions in the Middle East, national crude oil prices may change rapidly. Goldman Sachs has warned that a prolonged disruption near the Strait of Hormuz could double crude oil prices from current levels, although the Wall Street investment bank believes this is unlikely to happen.

Robert Rennie, head of commodities and carbon research at Westpac, said: "The United States and Britain had warned of action if the Houthi rebels continued to launch attacks, so this action was actually not unexpected." Rennie said, By the end of 2023, the market may be too focused on global supply growth, while a sharp deterioration in the Red Sea situation has been underestimated until 2024. With the Houthi leader stating that any U.S. attack would not go without a response, WTI crude oil prices could rise above $75 a barrel (WTI is currently hovering around $72) and Brent crude oil prices due to shipping disruptions caused by the situation in the Red Sea Possibly above $80 (Brent currently hovers around $77).

Citi, a major Wall Street bank, tends to be bearish on international crude oil. Citi recently lowered its 2024 Brent crude oil price forecast by US$1 to US$74/barrel, and lowered its 2025 forecast by US$10 to US$60/barrel. However, Citi said that recently Armed activities by various parties in the Red Sea may lead to further tensions in the Middle East, and risk premiums may rise in the short term.

Citi analysts said: “We believe that weakening market fundamentals, in the absence of major supply disruptions, will lead OPEC+ to extend the first quarter of 2024 production cuts throughout 2024 and only begin to reduce production in the second half of 2025. .” The analysts also noted: “While OPEC+ may extend production cuts, there will still be a large surplus, which may make it increasingly difficult for Brent crude oil prices to maintain a price of $70/barrel in our base case.”

Analyst: Be cautious about the outlook for gold prices to “double and soar”, but it seems to be close to a phased bottom

Bob Moriarty, founder and analyst of a precious metals finance website, outlined his investment layout plan for 2024, emphasizing that the precious metals market has shown negative sentiment in the past three weeks. He called on investors to be cautious about the prospect of a doubling of gold prices, emphasizing that they will only become cheap when dramatic events occur in the financial system.

Bob agrees with the common view among many in the market that the U.S. domestic economy may enter a recession in 2024.

“The past three weeks have been negative for the gold and silver markets from a sentiment perspective. The signals are that we are close to a bottom, and I believe that to be true. But it is just a belief, and if it is true, Then there are a large number of junior miners who are about to explode higher," he said in his outlook.

He continued: “Have you ever heard the saying ‘prices are always right, opinions are often wrong’? It’s strange that so many gold cheerleaders, close to hundreds of them, are constantly talking about manipulation and suppression , they give investors the idea that somehow the price of silver/gold will double or triple overnight.”

"However, this is not true."

Bob explained to investors that if you carefully examine the price charts of nine different metals, including aluminum, iron, copper, nickel, zinc, gold and silver, you will find that gold and silver have performed best on most time frames over the past hundred years. Inside is rising.

He emphasized: "It is a fiction to say that gold and silver are cheap. They will only become cheap when something dramatic happens in the financial system."

"I believe that's actually going to happen, but that's what it takes to move gold and silver prices."

He also noted that contrarian investing can be crucial to successful speculation, and traders can mix sentiment indicators to identify key market turning points.

In addition to the gold market, Bob also mentioned the US stock market. He suggested that when the VIX volatility index approaches 10, the market needs to pay attention to the U.S. stock market below.

David Haggith, author of The Great Recession Blog, pointed out that every major U.S. bank's fourth-quarter 2023 report exceeded the threshold for one reason or another, helping stock investors find exit opportunities. As the yield curve begins to invert, people are noticing that recession risks are higher than thought.

"Banks collapse, inflation heats up and global warming freezes over faster than hell," he warned.

He made an important point about "why the Fed has made it clear that it has zero intention of cutting interest rates in March" and that all greedy investors are constantly daydreaming about the pivot, "I don't understand these circumstances over the past six months. , how that translates into a rate cut by the Fed in just over two months.”

Six major currency pairs, US dollar index and gold resistance/support levels on January 15

This article provides support and resistance levels for the U.S. dollar index, euro, pound, Japanese yen, Swiss franc, Australian dollar, Canadian dollar and gold.

The world is ushering in the largest "election year" in history! JPMorgan: The global economy and stock markets will be under pressure

Financial Associated Press, January 15 (Editor Liu Rui) 2024 is the largest "election year" in global history.

According to statistics, more than 50 countries and regions around the world will stage election dramas this year. Among them, elections in major countries such as the United States and Russia have affected the world's nerves. This year’s elections in various countries will cover nearly half of the world’s population, and are expected to be the year with the most elections and the broadest coverage of the population in history.

JPMorgan Chase wrote in a recent report that as we enter this "election year", elections in many countries are expected to have a significant impact on the economy and stock markets. The global economy is expected to face downward pressure, while stock markets are likely to exhibit more volatility.

Global economic growth is under pressure

In addition to the general elections that will be held in the United States and Russia in November and March respectively this year, the new European Parliament elections will also be held from June 6 to 9. British Prime Minister Rishi Sunak also recently revealed that his plan is to hold general elections in the second half of this year. In addition, many countries such as Mexico, Indonesia, and South Africa will also hold general elections this year.

JP Morgan strategists wrote in a report that four trends are likely to continue in the election results in many countries around the world - polarization, populism, democratic deterioration and geoeconomic fragmentation .

They wrote:

"Many elections are likely to be close ones. Some countries recognize that populists cannot achieve their goals, while others remain fascinated by populists. But overall, we think these trends are unlikely to change , so we believe the election fever in 2024 will ultimately have a negative impact on global growth, depressing the performance of growth stocks relative to value stocks ."
The report said populist regimes often push for large-scale policy reforms, which tend to drive up inflation in the short term. They also mean more borrowing and trade restrictions, which are downward forces on global economic growth.
The U.S. election has the greatest impact

Of all the elections, JPMorgan expects the U.S. election to be the most important. Judging from the current poll results, this year's US election is likely to see another showdown between Biden and Trump.

The report stated:

“We believe the U.S. election is more consequential and worth hedging than any other election, as a Trump victory could have broader macro implications, including undoing or reversing many of Biden’s policies through a series of executive orders policy ."
One of Trump's expected policies is to impose general tariffs of 10%, which is expected to trigger a full-scale trade war. If implemented, this could push the U.S. dollar up 4%-6% in the foreign exchange market. At risk of depreciation will be the yuan, the euro and the Mexican peso .
Uncertainty over U.S. and other global elections will also cause VIX to rise, while a potential recession will worsen the situation. JPMorgan strategists found that the volatility of the S&P 500 is 2 points higher in U.S. election years than in non-election years.

"As such, investors looking to position themselves for election uncertainty and a resurgence of populism should prepare for higher risk premiums and higher market volatility," the report said.
Deterioration of democracy will lower stock market returns
In addition to populism, JPMorgan Chase said that another key theme to watch in this election year is the continued erosion of "democracy indicators", which will also have an impact on the market.

JPMorgan Chase cited the findings of independent watchdog organization "Freedom House" and others, saying that the decline of global democracy and freedom has become a trend in the past 17 years.

"Weaker governance contributes to higher volatility and lower price-to-earnings ratios, and we find that after a democracy indicator downgrades, stock returns over a 10-year period are on average 5% lower than in countries that upgrade this indicator," JPMorgan said.

Dollar gains before inflation data, bitcoin slips

By Karen Brettell

NEW YORK (Reuters) - The dollar rose against the euro and yen on Tuesday as traders awaited inflation data on Thursday for clues on when the Federal Reserve is likely to cut rates.

In cryptocurrencies, bitcoin dipped but remained near its strongest level since April 2022 as anticipation mounted the Securities and Exchange Commission will imminently approve spot bitcoin exchange-traded funds (ETFs).

The dollar index had hit a five-month low in December when investors priced for the likelihood that the Fed will cut rates sooner rather than later as inflation eases closer to its 2% annual target and economic data shows signs of softness.

It has recovered from some of that weakness this year, with the sell-off seen by some as overdone heading into year-end. But Fed expectations are likely to continue to drive dollar moves.

“Throughout December the theme was really the Fed pivoting amidst weaker data,” said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto.

“At this point we’re pricing in a significant amount of easing from the March meeting and the risk/reward is tilted to a degree. Maybe there are some market participants out there that look at what’s priced in and are easing up on their dollar shorts that were initiated in December,” he added.

The release on Thursday of the consumer price inflation report for December will be the main piece of economic data this week. It is expected to show headline inflation rose 0.2% in the month and by 3.2% on an annual basis.

If the data confirms that inflation is continuing to moderate it could boost expectations for a March rate cut, though if it comes in above expectations it could also reverse some of that pricing.

Fed funds futures indicate a 64% probability of a March rate cut, down from 70% a week ago, according to the CME Group’s FedWatch Tool.

"The market is still trying to find its feet in terms of the trajectory and timing of the first U.S. rate cut," said Kamal Sharma, senior G10 FX strategist at Bank of America (NYSE:BAC), who expects the Fed to start cutting rates at the March meeting.

"Our base case scenario is for a soft landing, lower dollar, bull steepening and that broadly should be supportive of risk assets more generally," Sharma added.

Data on Tuesday showed that the U.S. trade deficit unexpectedly narrowed in November as imports of consumer goods fell to a one-year low amid slowing domestic demand, a trend that, if it persists in December, could result in trade having no impact on economic growth in the fourth quarter.

The U.S. dollar index, which measures the greenback against a basket of six currencies, was last up 0.26% at 102.57.

The euro dipped 0.23% to $1.09250, while sterling slipped 0.39% to $1.26990.

In Asia, data on Tuesday showed core inflation in Japan's capital slowed for the second straight month in December, taking some pressure off the Bank of Japan to rush into exiting ultra-loose monetary policy.

The dollar was last up 0.25% at 144.54 yen.

Bitcoin fell 0.26% to $46,874, after reaching a 21-month high of $47,281 on Monday.

Investment managers had on Monday disclosed the fees they plan to charge for their proposed spot bitcoin ETFs, in another step toward approval this week by the U.S. securities regulator.

The morning catch up: Weak open ahead of highly anticipated inflation data

Following a mixed session on Wall Street overnight, the local market is set to open lower this morning. The ASX 200 futures were trading 12 points lower, down 0.16%, as of 9:00 am AEDT.

The Dow Jones fell 0.4% while the Nasdaq inched 0.1% higher. The S&P 500 finished down 0.2% after trading as much as 0.70% lower, while the Russell 2000 small cap index underperformed as small caps came under pressure, losing 1.1%.

All eyes will be on the release of the November consumer price indicator report this morning, which is set for release at 11.30 am AEDT.

UBS expects CPI to be 0.6% higher, month on month, but in annual terms, it expects a drop to 4.6%, down from 4.9% in October. Yet it notes that the strength in November retail sales, as reported yesterday, does suggest some “lingering inflation”.

What happened overnight?

Here’s what we saw (source Commsec):

US markets

US sharemarkets were mixed on Tuesday as an uptick in US Treasury yields pressured some megacaps and traders scaled back expectations for an early start to interest rate cuts ahead of key US inflation reports due out later this week.

The Dow Jones index fell by 158 points or 0.4% after being down as much as 310 points.
The S&P 500 index dipped 0.2%.
The Nasdaq index added 14 points or 0.1%.
Shares of Apple (NASDAQ:AAPL) and Tesla (NASDAQ:TSLA) lost 0.2% and 2.3% respectively, while chip stock Micron Technology (NASDAQ:MU) shed 1.9%. Intel (NASDAQ:INTC) fell by 0.8%. But Nvidia traded 1.7% higher, reaching a fresh all-time high. Amazon (NASDAQ:AMZN) was up 1.5% along with Alphabet (NASDAQ:GOOGL), which also rose 1.5%.

Shares of the streaming giant Netflix (NASDAQ:NFLX) slipped 0.6% following a downgrade by Citi to neutral from buy.

Boeing (NYSE:BA) shed 1.4% as the US National Transportation Safety Board continued its probe into a recent mishap.

Juniper Networks (NYSE:JNPR) surged 21.8% after a news report that Hewlett Packard Enterprise was in talks to buy the networking product maker in a US$13 billion deal. The server maker dropped 8.9%.

European markets

European sharemarkets slipped on Tuesday, as investors turned risk-off with government bond yields across Europe rising, though advancing heavyweight healthcare stocks helped limit some losses.

The continent-wide FTSEurofirst 300 index lost 0.2%.
In London, the UK FTSE 100 index dipped 0.1%.
Basic resources led sectoral declines, falling 1.4%, while banks lost 0.9%, snapping a three-day winning streak. Keeping a lid on losses, healthcare stocks extended gains to a second consecutive day, climbing 0.7%, hovering at a near 17-week high hit in the previous session.

Commodities

Global oil prices climbed about 2% on Tuesday as the Middle East crisis and a Libyan supply outage pared the previous day's heavy losses. Prices were supported by the closure of Libya's 300,000 barrels per day Sharara oilfield, one of Libya's largest, due to political protests.

The Brent crude price rose by US$1.47 or 1.9% to US$77.59 a barrel.
The US Nymex crude price gained US$1.47 or 2.1% to $72.24 a barrel.
Base metal prices were mixed on Tuesday.

Copper futures dipped 1.3%.
Aluminium futures gained 0.6%.
Gold price:

The gold futures price fell by US50 cents or less than 0.1% to US$2,033 an ounce on Tuesday.
Spot gold was trading near US$2,029 an ounce at the US close.
On Tuesday, iron ore futures slid US35 cents or 0.2% to US$140.52 a tonne, down for a fourth day, as new home sales across eight key Chinese cities almost halved in the week to January 7, according to a Mysteel report.

Currencies

Currencies were weaker against the US dollar in European and US trade.

The Euro fell from US$1.0961 to US$1.0910 and was near US$1.0930 at the US close.
The Aussie dollar dipped from US67.17 cents to US66.76 cents and was near US66.85 cents at the US close.
The Japanese yen eased from 143.57 yen per US dollar to JPY144.61 and was near JPY144.50 at the US close.
What’s on today?

11:30 am: Australia Monthly CPI Indicator (Nov)

On the small cap front

The S&P ASX Small Ordinaries gained 1.25% yesterday, while the ASX 200 ended 0.93% higher.

You can read more about the following throughout the day.

Reward Minerals Ltd (ASX:RWD) is seeking to raise $22.785 million via an entitlement offer to complete the acquisition of the Beyondie SOP Project and commence R&D activities at the site.
Globe Metals & Mining Ltd (ASX:GBE) has appointed Paul Smith as its chief operating officer effective immediately.
Kali Metals Ltd (ASX:KM1) announces that preliminary exploration programs completed pre-IPO have identified and sampled lithium-bearing pegmatites across multiple locations within the Higginsville District Scale tenement holding.
Maximus Resources Ltd (ASX:MXR, OTC:MXRRF) has defined a number of high-priority lithium targets at its Lefroy Lithium Project joint venture with the South Korean Government mining corporation KOMIR, on receiving assay results from the first phase of a project-wide soil geochemistry program.
Read more on Proactive Investors AU

Analyst: Gold prices may fall further in the short term, but the long-term target is still around 2176

FX Empire technical analyst and global market strategist Bruce Powers said gold prices are giving up year-end gains and testing support at the 20-day moving average, raising questions about the depth of the pullback.

Bowers wrote after the close of futures trading on Wednesday (January 3): "Gold retraced 50% of its previous gains and found support for the day at $2,031. It also successfully tested the 20-day moving average of $2,034 today. Support. This is the second test of support at the 20-day line, the first being on December 15."

Powers said it remains to be seen whether the support level can be sustained and whether prices can climb further. "There are no signs of this yet, so a deeper retracement is expected in the short term, but it may not be significant,"

he said. He went on to add: "There may be support around the lower uptrend line, and the price will move based on where it is. The timing of this line varies as well as the 61.8% Fibonacci retracement from 2017. Slightly lower is the 50-day EMA at $2,008. These levels are likely to see increased demand. If gold remains strong for the foreseeable future To hit new highs in the future, ideally we would like to see a price structure that maintains higher swing highs and lows in an uptrend channel."

Powers pointed out that gold prices are currently at a swing low of $1,810 from early October. The third phase of the uptrend begins. “The first two phases have symmetry in time and price, which may provide clues to the upside target of the third phase.”

He said: “The first rise after the October low saw gold prices rise by 199 points . or 11%, over 15 days, while the second uptick was 203 points, or 10.5%, also over 15 days. This does not mean that the third phase up in a trend will match the previous move, but it probably will, or There is at least some mathematical relationship.”

The third phase of the uptrend, which began with the $1,973 swing low set on December 13, has successfully tested support at the 50-day moving average. “Given that the current uptrend is on its 13th day, a timing match looks unlikely, however, a similar move in price could be represented by an ascending ABCD pattern, where the CD leg equals the AB leg.” “The pattern’s target is

located at $2,176," Powers concluded. "If reached, it will demonstrate the mathematical relationship between all three recent increases."

On Thursday, spot gold fell to near 2036, hitting the 21-day moving average support, closing at $2043.25 per ounce, of course an increase of about 0.1%. The cumulative weekly decline was 0.88%.

2024 investment strategy: It is dangerous for the Federal Reserve to "boost" Biden's re-election! The US dollar may face “heavy pressure” in 2024

On Thursday (January 4), Peter Schiff, CEO and chief global strategist of Pacific Capital, issued a stern warning in his latest podcast: “2024 could be terrible for the dollar One year."

Peter explained: "In an environment where the dollar is so weak, there is no way that inflation will come down because that would really drive up commodity prices. That would drive up our trade deficit and put heavy pressure on the dollar."

Peter said this was a classic scenario where currency depreciation leads to domestic inflation. The trade deficit is not only a symptom of economic problems, but also a factor in the depreciation of the dollar. #

As long as the United States continues to run these deficits, pressure on the dollar will continue. Meanwhile, investors have flocked to other safe-haven assets such as the Swiss franc.

In 2023, the franc rose sharply by 10%: this is a very negative signal for the US dollar in 2024 and a positive signal for gold, because people are buying the Swiss franc as a safe haven. Gold is a safer haven than the Swiss franc, but the fact that the Swiss franc has appreciated so much against the US dollar shows skepticism towards the US dollar. "

Here are three reasons why Peter thinks inflation could rise further this year.

1. The Federal Reserve wants to help Biden be re-elected

The Fed is heavily influenced by political dynamics, and as the 2024 presidential election approaches, it is already taking actions to align with current politicians.

"I think the Fed will do everything it can to try to get Biden re-elected, and the Fed chair always wants to work with any administration that's in power," Peter said.

This has less to do with blatant political bias and more to do with self-preservation.

The president plays a decisive role in appointing the chairman of the Federal Reserve. Given this, Powell is motivated to prioritize monetary policies that could boost Biden's reelection. This is exactly what we saw.

The Federal Reserve has announced that it will significantly reduce interest rates from 2024 to 2025. The strategic timing is for this year's US election.

Peter predicts that the Fed will continue to pursue a dovish inflation policy through the end of this election year.

2. The “strength” of the U.S. economy depends on inflation

The perceived strength of the U.S. economy is largely illusory, the result of inflationary policies rather than real economic growth.

Peter explained that higher stock market indexes and other financial indicators in 2023 reflect investor expectations for inflationary stimulus from the Fed, rather than real economic progress: "Investors expect bonds to rise sharply. That's what they think. The Fed There will be a return to zero or close to zero quantitative easing. They are now betting that this easing cycle will be priced into the market.”

The Fed would rather keep monetary policy loose than ruin its bets on the broader economy and suffer a massive stock market crash. Congress would also rather keep the budget high than risk losing re-election.

This all drives up inflation, which Peter calls "their only magic trick."

3. Contribution to the U.S. trade deficit

Peter linked the dollar's weakness to the United States' recent large trade deficit. A weaker dollar would mean higher commodity prices and even an increase in the trade deficit, which in turn would further weaken the dollar.