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Dollar Index: Weekly Analysis & Intraday Forecast

Goldilocks should be careful she doesn’t burn her lips. After a startling US inflation report for January, it’s plain that her porridge isn’t too cold, at least not yet — but it very well might be too hot. That led to an interesting readjustment on markets, as traders pondered the possibility that Team Transitory hadn’t been right after all.

The debate throughout 2021 was whether the inflation then taking hold was truly “transitory” — driven by temporary supply blockages caused by the pandemic — and would come down without the help of hawkishness from central banks. Team Transitory lost that battle, but they certainly had a point that much of that extreme spike was indeed short-lived. That shows up if we compare month-on-month rises in goods (excluding always erratic food and energy) and services. Goods suffered a huge shock that is now over; services inflation, however, has moved to a level notably higher than before the pandemic. Goods inflation fell last month, while services rose:

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