US Growth Slump: Inflation, Forex, and Commodities Insight

Stephen Innes
Published: Mar 30, 2023, 06:29 UTC

Markets are entering end-of-month rebalancing, while the US faces growth damage and Forex shifts; gold and oil prices are influenced by changing economic conditions and investor caution.

US Dollar, FX Empire

In this article:

Key Points:

  • Inflation tackled via a credit crunch
  • Fed policy remix impacts US dollar
  • Gold’s downside risk and demand
  • Oil prices tied to US economic indicators


I think markets are getting into end-of-month rebalancing mode, which could make the price action somewhat random over the next 36 hours. Still, generally, we should expect, at a minimum, some trend reversal on profit-taking to pad the month-end books after most traders got hit with the ugly stick in March. But don’t count on that, as this market has become one big revolving dichotomy.


It should be a fairy tale setting for EURUSD bulls. The apparent FED policy remix with the US rates market betting that tighter credit conditions could substitute for rate hikes to slow the economy should produce an entirely different arc for the US dollar than if the Fed simply hikes.

Unlike a higher risk-free rate of return via 10-year bond yields, which typically support the US dollar when the Fed hikes, tighter credit conditions lower the expected real rate of return on domestic assets, deter portfolio flows, and weaken the currency.

But I think there is lingering US dollar safe-haven demand on worries that since the US has sneezed, the rest of the world will eventually catch a cold.


While we think there could be some modest downside risk for gold as broader market sentiment benefits from a calming of bank sector tumult. Moving beyond this mini-crisis, gold should still be in demand on dips to $1925 on the forever-increasing recession fears.


Let me apologize for boring you to tears incessantly discussing the oil market today. And as much fun as I have when it comes to discussing equities, mainly because commenting on stocks doesn’t require much in the way of intellectual expertise these days, i.e. rates go down, stocks go up; Oil is one of those assets that if you get it wrong, it usually ends up being a very costly wrong hence so I like to keep my Fund investors, “Copy Traders” & PAMM accounts well informed.

The US’s banking sector issues are considered unique to the US, in so much as the deposit flight is idiosyncratic to US’s decentralized system and getting exacerbated by technology as deposits can rate shop at a click. Hence the deeper I dig into the solutions to the flighty deposits, the more difficult it could prove to find a solution.

Even if China can still grow at 5% and the EUR area skirts a recession this year, history shows that oil prices have predominantly followed US real economic indicators, which is still a big problem for bulls. If the upcoming US PMIs re-affirm that US growth will slip into recession, oil prices will not come out of this mini-banking crisis completely unscathed, and downside price risk could start to dominate again.

About the Author

Stephen Innescontributor

With more than 25 years of experience, Stephen Innes has  a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.

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