Can the strong labor market stimulate the US inflation?
The US labor market expanded to 148,000 jobs in December, almost 40,000 below the average forecast. Unemployment remained at 4.1%, and the level of participation in the labor force was approximately 2/3 (62.7%).
On Tuesday, Euro reached a 4-month high at 1.2081, recording a 3-percent growth since mid-December. EUR/USD is preparing to break through the Septembers peak at 1.21, which could create a psychological basis for the pair’s growth in 2018.
The tightened movements of the foreign exchange market signal a temporary “calm”, as investors are already preparing for the New Year and thus are paying less attention to the current market catalysts.
Janet Yellen will hold a farewell press conference today, which will be closely monitored by investors. There is hope it will reference the tax reform, as well as, its impact on inflation and unemployment.
The spokesman for the Chicago Federal Reserve Bank, Charles Evans, said on Wednesday that he was concerned about the drop in inflation expectations in the US and urged the regulator to respond by raising the inflation bar in the economic forecasts.