The latest data from the US labor market, a promising slowdown in economic growth, and a rise in inflation indicate a high probability of the national economy collapsing into stagflation.

America's economic problems, supported by the consequences of COVID-19, are steadily dragging the economy of this country into a hole. High inflation, estimated prospects for slowing economic growth, and then its probable stagnation amid serious problems in the labor market, threaten the emergence of such a phenomenon as stagflation, which will be extremely difficult to get out of. The current political and economic course leads the United States directly to new economic problems. So, without getting out of one crisis, they risk falling into another.

The most unpleasant thing in this situation is that America, being in the center of the world economy, will become the reason for the start of a new global crisis. At the same time, excessive political ambitions against the background of confusion and vacillation in power can cause first a local military conflict, and then a large-scale one.

On the wave of excess dollar liquidity before winter, the prices for commodity and raw materials assets continue to increase, into which investors are trying to convert "helicopter dollars". In fact, they seek to exchange unsecured money for real assets. If such an increase in prices occurred in a situation of real growth of the world economy, then we could talk about real demand. However, this is not the case in the current conditions.

As for the currency market, there is a consolidation of the euro, pound, and franc against the US dollar. At the same time, commodity and commodity currencies are supported – Australian, New Zealand, and Canadian dollars.

Tomorrow, consumer inflation data in America will be published. Inflation is expected to consolidate at the level of 5.3%. In addition, core inflation is expected to rise by 0.3% in September from 0.1% in August.

How will the market react to this data?

If the inflation figures turn out to be at the level of expectations or higher, this will increase the likelihood of an earlier increase in the Fed's interest rates, which will hit the US stock market again, and then around the world. These data will cause a new surge of sales in the government debt market with a simultaneous increase in yields. Against this background, the dollar exchange rate will receive support, while gold will begin to decline. But the strengthening of the US currency, primarily against European currencies, will be local.

On the other hand, crude oil prices may suspend growth for a while. It will also not stop the upward dynamics of commodity currencies, which are growing on the wave of demand for commodity assets and raw materials. The yen will receive support as well.

If the inflation values show a decline, then the opposite picture can be observed. We will find out tomorrow what the market's reaction to the data will be.

Forecast of the day:

The AUD/USD pair is consolidating above the level of 0.7310 while waiting for the important US inflation data. The pair could correct to this level before continuing its growth to 0.7470 amid the release of inflation figures.