Morgan Stanley seems to think so
The reflation/inflation theme is going to be a key topic for the market this year but the big question remains, is it really coming back? Well, at least Morgan Stanley says it is.
The firm argues that US core PCE inflation will overshoot 2% this cycle, highlighting that the divergence in their view from the consensus being the assumption surrounding strength of private sector risk appetite.
"Our views on inflation, as on growth, are more bullish than the consensus. Since 3 April 2020, we have argued that a V-shaped recovery in growth would unfold and in May 2020, we warned that inflation will make a return this cycle. Since then, our conviction has only increased. Our GDP growth forecast of 5.9% y/y for the US in 2021 is significantly above consensus estimates at 3.9% y/y. We see US core PCE inflation ending the year at 2% y/y and staying above 2% on a sustained basis from 2022. In contrast, the consensus sees it reaching 2% over a longer timeframe and is skeptical that inflation will exceed 2% for a sustained period."
There's going to be a lot of debate on this matter but if there's one side of the camp that has been wrong more often than not in recent years, it is the inflationistas.
Further Development
Analyzing the current trading chart of EUR/USD, I found that EUR got potential for the another upside swing.
1-Day relative strength performance Finviz
Based on the graph above I found that on the top of the list we got Natural Gas and Platinum today and on the bottom Ethanol and Feeder Cattle.
Key Levels:
Resistance: 1,2300 and 1,2340
Support level: 1,2240
