Today’s JOLT numbers although a lagging indicator reinforces what economists have known already, inflation is here and will likely stay for a while unless central banks start to retract their forecasts of no rate hikes till sometime next year. Governments will have to start to re-evaluate their rent and wage subsidy programs in order alleviate the potential of upcoming labour shortages, and house prices will have to slow down in order for the average consumer to catch up. These factors will impact inflation in the short term, but the question is will these things happen?
Equity markets are down across the board and normally currencies would have a tendency to react negatively to this news. The Dow has now joined the tech indices and is down 1.7% this morning, generally, when U.S. equities are down significantly the USD tends to get stronger as investors sell their assets and buy USD which is known as “ a flight to quality”. It means investors put their money in the safest assets possible which in the past has been the USD. The Canadian dollar remains unchanged, while the EUR and GBP are higher to the USD, which goes against the grain. In this case, Europe and Britain are starting to reopen their economies sooner than North America which is giving investors further confidence and also expectations of consumer confidence, both currency boosters.
Expect a lot of volatility over the next few days.