Gold prices moved higher on Tuesday despite a rally in the dollar. Gold prices surged against the Euro, as it appears that inflation is on the rise. Fed Chair Gerome Powell in a speech in Boston said that the Fed has been able to keep inflation in check by managing expectations. Amazon raise its minimum wage to $15 per hour on Tuesday which could be the large increase in wage inflation the Fed was finally looking for.
Technical Analysis
Powell Believes in Phillips Curve
The Fed believes that the decline in unemployment should be accompanied by a rise in inflation, mainly from wage inflation. The last few years has seen the drop in unemployment down to 3.8% but no associated surge in wages. Wages are rising at 2% year over year and current interest rates and sentiment are holding wages down. Powell still believe in the Phillips Curve even though the relationship seems to have broken down. Powell said the model isn’t dead. While the Fed has been watching employment costs there have been few pressures from the tariff. On Tuesday Amazon announced that it would be raising it minimum wage to $15 per hour. This is a clear sign of wages on the rise which will likely be match by competitors.
(Source: FX IMPIRE)
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