Overheating Everywhere!

The world’s economies are maintaining a dovish monetary stance, possibly anticipating a decrease in inflation.

  • The RBA will continue its bond purchases, maintaining its current interest rates, possibly until 2024.
  • The ECB dismissed the idea of hiking rates in the coming next year.
  • The Bank of England kept rates steady despite hinting for months of a possible hike.
  • The US Fed said the idea of raising rates wasn’t even a topic during the last FOMC meeting.

Global Inflation Rate from 2016 – 2026. Retrieved 9 November 2021 from https://www.statista.com/statistics/256598/global-inflation-rate-compared-to-previous-year/

The signal central banks are giving the markets: they’re not worried about runaway inflation. So, does this mean that central banks see inflation primarily as a “supply” issue versus a “monetary” issue?

Prices aren’t the only thing overheating…so the G20 ended last weekend’s meeting with an agreement to set shared targets after the world’s greenhouse-gas concentrations were “way off track” according to the UN, hitting a record high last year. G20 leaders endorsed a 15% minimum global tax rate for multinational businesses, which may kick in in 2023.

Remember, G20 countries produce 80% of the world’s greenhouse-gas emissions. They also generate 75% of the world’s trade and make up around 60% of the global population.

Your squid money sleeps with the fishes…sadly, last week’s other big story and painful market lesson. A new altcoin called Squid launched at $0.01 and rose to over 23 million percent to $2.9K before crashing to zero. It was a suspected “rug pull,” where the coin creators took the money and ran, and their original crypto white paper has also been pulled. As with many scams, unfortunately, some investors sank their entire savings into Squid before it got gulped up by much bigger fish.

Economic News Watch

Look forward to mainly inflation and employment related news in Australia and the US and macroeconomic forecasts from the European central bank.

Drought Heats Up as Water Futures Fall

Here’s the current drought report for the western US:

Here’s the Nasdaq Veles California Water Index futures:

What’s the price action telling us? Were water prices too high by industry standards? Is the market anticipating a break from dry weather in the form of a wetter season? Or are buyers looking for an opportune price level to jump in. 

Note the double top at $950. The range between $650 and $750 marks the 61.8% to 50% Fibonacci retracement zone, which may be favourable to buyers. What we’re not seeing quite yet is follow through in buying pressure (see volume). And although the Chaikin money flow dipped below zero, it’s now indicating a divergence between price and volume as money is now quietly trending toward the upside. Time to target bullish entries?

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