Producer prices are to increase 0.4% on the monthly level after a decline of 0.1 in December, while the core PPI probably rose consistently by 0.2% in January, but the yearly core prices probably inched higher to 2.2%, highlighting that inflation is a well anchored so far yet still at the upper limit of the range and if it explode then it is stagflation what we are talking about.

Inflation is not yet a big problem in the economy so far, especially as the feds are taking the extreme dovish stand to handle growth levels, in a stronger words to escape recession, yet if they didn’t pay a close attention to prices levels well they will be escaping recession and heading to stagflation which is a lot worse for any economy in the world.

In another report today, consumer confidence is expected to decline to 82.0 in February following 87.9 in January, marking the lowest level of confidence in the U.S. economy in four years, and why not as consumers sees all the economic pieces are falling apart, and they see no light at the end of the tunnel, so why should they have any confidence in the economy??!!

We all saw how Michigan sentiment declined a couple of days ago below 70, and it did have a very huge effect on the dollar prices because this is actually a clear sign of contraction, not only now, but also in the near future…

This is the second chapter now, confidence and inflation, another two important indicators to describe how bad the situation is in the U.S. economy, and that will definitely be reflected on the U.S. dollar, if the readings were as bad as we expect, with some carry traders back in the picture, market risks are increasing gradually and the dollar is not the most favorable product to avoid the risks.