{"id":20042,"date":"2026-01-09T23:00:00","date_gmt":"2026-01-09T23:00:00","guid":{"rendered":"https:\/\/alchemymarkets.com\/?post_type=market_insights&p=20042"},"modified":"2026-01-09T14:44:33","modified_gmt":"2026-01-09T14:44:33","slug":"a-k-shaped-economy-sticky-inflation-and-a-bullish-eur-usd-triangle","status":"publish","type":"market_insights","link":"https:\/\/alchemymarkets.com\/de\/education\/market-insights\/weekly-outlook\/a-k-shaped-economy-sticky-inflation-and-a-bullish-eur-usd-triangle\/","title":{"rendered":"A K-Shaped Economy, Sticky Inflation, and a Bullish EUR\/USD Triangle"},"content":{"rendered":"\n

The Story of a K-Shaped Economy<\/strong><\/h2>\n\n\n\n

The U.S. economy has entered what economists call a K-shaped recovery<\/em> \u2014 a term used when economic growth diverges sharply between different income groups and sectors.<\/p>\n\n\n\n

On one hand, the\u00a0top 20% of households, who control roughly\u00a070% of the nation\u2019s wealth, continue to spend freely. Equity markets at record highs have boosted their confidence, fueling consumption and investment in high-growth areas like\u00a0AI, technology, and software.<\/p>\n\n\n\n

On the other hand, the\u00a0bottom 80%\u00a0\u2014 particularly middle- and lower-income households \u2014 are feeling the pinch. Confidence levels remain subdued, and many expect unemployment to rise. The\u00a0labour market\u00a0is showing early cracks, as job openings narrow and wage pressures ease.<\/p>\n\n\n\n

This bifurcation explains how the U.S. can report\u00a0strong GDP growth\u00a0alongside\u00a0softening employment. U.S. growth would have been negative last year if not for investment in software and IT equipment, which alone added\u00a00.8 percentage points\u00a0to GDP in Q3.<\/p>\n\n\n\n

In short:\u00a0growth is real but concentrated, and that imbalance is likely to persist through 2026. However, this also makes the U.S. economy more vulnerable to a potential\u00a0tech bubble\u2014a risk markets will continue to price in.<\/p>\n\n\n\n

\n\n\n\n

Today\u2019s NFP: A Snapshot of the Labor Market<\/strong><\/h2>\n\n\n\n

Today\u2019s\u00a0Non-Farm Payroll (NFP)\u00a0report once again highlighted the dual nature of the economy. Job creation slowed compared to previous months, while wage growth remained modest. This supports the narrative that\u00a0the Fed\u2019s tightening cycle is cooling the labour market\u00a0but not collapsing it.<\/p>\n\n\n\n

Markets reacted cautiously, with Treasury yields pulling back slightly and the dollar softening as traders reinforced expectations of\u00a0Fed rate cuts later in 2026.<\/p>\n\n\n\n

However, the data wasn\u2019t weak enough to justify immediate easing. Instead, it strengthened the case for a\u00a0\u201csoft landing\u201d\u2014 an outcome where inflation continues to fall without a major rise in unemployment.<\/p>\n\n\n\n

Forward-looking indicators, such as the\u00a0ISM Services Employment Index\u00a0and\u00a0average weekly hours, suggest labor demand is slowing but stable. That means the Fed can remain patient, monitoring inflation before committing to any major pivot.<\/p>\n\n\n\n

\n\n\n\n

The Fed\u2019s Dilemma: Sticky Services, Fading Goods Inflation<\/strong><\/h2>\n\n\n\n

Fed Chair\u00a0Jerome Powell\u00a0has made it clear: tariffs and goods prices are no longer the main inflation drivers. Indeed, price pressures in tariff-sensitive categories \u2014 like appliances and electronics \u2014 have cooled.<\/p>\n\n\n\n

But the\u00a0effective tariff rate\u00a0remains higher than last summer, suggesting a modest inflationary pass-through could still occur. The real story lies in\u00a0services inflation, driven by\u00a0rents and wages, which are gradually easing.<\/p>\n\n\n\n

Still, data distortions from last year\u2019s\u00a0government shutdown\u00a0mean next week\u2019s inflation release could surprise on the upside. A \u201chot\u201d CPI print would not derail the bigger picture but could prompt markets to push back their\u00a0rate cut expectations\u00a0slightly.<\/p>\n\n\n\n

The key takeaway:<\/strong> inflation\u2019s path to 2% will be\u00a0bumpy but achievable, with the Fed likely to start cutting rates around\u00a0mid-2026.<\/p>\n\n\n\n

\n\n\n\n

Looking Ahead: Next Week\u2019s Economic Calendar<\/strong><\/h2>\n\n\n\n

United States: December CPI (Tuesday)<\/strong><\/h3>\n\n\n\n

All eyes will be on the\u00a0December CPI\u00a0report \u2014 arguably the most important macro release of the week. November\u2019s data was heavily skewed by collection issues during the government shutdown, which amplified holiday-related discounts and produced an artificially low inflation reading.<\/p>\n\n\n\n

Consensus expects\u00a0core CPI to rise 0.3% MoM, but forecast is slightly higher at\u00a00.4%, lifting the annual rate to\u00a02.8%.<\/p>\n\n\n\n

Even if inflation ticks higher, it\u2019s unlikely to alter the market\u2019s view that\u00a0two 25bp rate cuts\u00a0are coming later this year. Powell has already suggested tariff-related inflation will\u00a0peak in Q1\u00a0before subsiding as energy prices and rents fall further.<\/p>\n\n\n\n

\n

Market Implication:<\/strong> A slightly hotter CPI print could trigger short-term dollar strength, but broader disinflation trends support the case for gradual Fed easing.<\/p>\n<\/blockquote>\n\n\n\n

\n\n\n\n

United Kingdom: November GDP (Thursday)<\/strong><\/h3>\n\n\n\n

The UK\u2019s economy continues to show a pattern of\u00a0first-half resilience and second-half weakness\u00a0\u2014 a trend that\u2019s persisted since 2022. November GDP is expected to\u00a0rebound modestly\u00a0after October\u2019s contraction, but the bigger picture remains one of\u00a0stagnation rather than recovery.<\/p>\n\n\n\n

Uncertainty around fiscal policy and lackluster consumer spending continue to weigh on growth, although seasonal adjustment quirks may be exaggerating the downturn.<\/p>\n\n\n\n

\n

Market Implication:<\/strong> GBP\/USD could remain range-bound as traders await clearer signals on Bank of England rate cuts, likely to follow the Fed\u2019s lead later in 2026.<\/p>\n<\/blockquote>\n\n\n\n

\n\n\n\n

EUR\/USD Technical Outlook: Elliott Wave Triangle Near Completion<\/strong><\/h2>\n\n\n\n
\"\"<\/figure>\n\n\n\n

Now, turning to the\u00a0EUR\/USD technical picture, the 4-hour chart (see attached) beautifully illustrates a\u00a0contracting Elliott Wave triangle<\/a>\u00a0labeled\u00a0A-B-C-D-E.<\/p>\n\n\n\n

Price action has respected the structure\u2019s boundaries, with\u00a0wave D\u00a0recently topping near\u00a01.19\u00a0and the pair now moving lower toward\u00a0wave E support around 1.1460, which also coincides with the\u00a0invalidation level.<\/p>\n\n\n\n

From an Elliott Wave perspective, triangles typically form in\u00a0wave 4 positions\u00a0and are followed by\u00a0a sharp directional breakout\u00a0\u2014 often in the direction of the prior trend. Given that the preceding move was bullish, the expectation is for\u00a0an upside breakout once wave E completes.<\/p>\n\n\n\n

The\u00a0RSI <\/a>near 31\u00a0further supports the idea that EUR\/USD is approaching\u00a0oversold territory, increasing the probability of a\u00a0bullish reversal\u00a0in the coming sessions.<\/p>\n\n\n\n

\n

Quarterly Forecast Implication:<\/strong>\u00a0This aligns perfectly with our\u00a0FX quarterly outlook<\/a>, which anticipates a\u00a0EUR\/USD rally\u00a0toward\u00a01.20\u20131.22\u00a0in Q1 2026 as U.S. rate cut expectations gain traction and the dollar softens.<\/p>\n<\/blockquote>\n\n\n\n

\n\n\n\n

Final Thoughts<\/strong><\/h2>\n\n\n\n

The global economy is clearly divided \u2014 a\u00a0K-shaped landscape\u00a0where prosperity and pain coexist. While the U.S. remains the engine of growth, that engine is running on\u00a0selective cylinders, heavily reliant on tech and wealthier consumers.<\/p>\n\n\n\n

Next week\u2019s\u00a0CPI and UK GDP data\u00a0will offer important clues about how sustainable this divergence is \u2014 and whether inflation\u2019s path back to 2% can continue without a policy misstep.<\/p>\n\n\n\n

Technically,\u00a0EUR\/USD is setting up for a major bullish move, with the Elliott Wave triangle nearing completion. If the E-leg holds above 1.1460, traders may soon witness a breakout that confirms the start of the next leg higher.<\/p>\n\n\n\n

\n\n\n\n

FAQs<\/strong><\/h3>\n\n\n\n

1. What does a K-shaped economy mean?<\/strong>
It describes an uneven recovery where wealthier households and certain sectors (like tech) thrive while others struggle.<\/p>\n\n\n\n

2. How did today\u2019s NFP impact market expectations?<\/strong>
The softer jobs print reinforced expectations for Fed rate cuts later in 2026 but didn\u2019t signal an immediate easing cycle.<\/p>\n\n\n\n

3. Why is next week\u2019s CPI report so important?<\/strong>
It will clarify whether the recent inflation slowdown was genuine or distorted by data collection issues during the government shutdown.<\/p>\n\n\n\n

4. Will a hot CPI derail the Fed\u2019s plans?<\/strong>
Unlikely. The Fed views any near-term inflation bumps as temporary, especially with wages and rents cooling.<\/p>\n\n\n\n

5. What\u2019s the outlook for the UK economy?<\/strong>
Growth remains weak but stable, with a mild rebound expected in November GDP after October\u2019s decline.<\/p>\n\n\n\n

6. Is EUR\/USD heading higher?<\/strong>
Yes, the Elliott Wave triangle suggests an upside breakout is likely once wave E completes, potentially targeting 1.20\u20131.22.<\/p>\n","protected":false},"excerpt":{"rendered":"

The U.S. economy continues to show K-shaped dynamics as growth remains concentrated while the job market softens. Ahead of next week\u2019s CPI, we analyze the data, the Fed\u2019s likely path, and EUR\/USD\u2019s bullish Elliott Wave triangle setup pointing to an upside breakout.<\/p>\n","protected":false},"author":162,"featured_media":20049,"parent":0,"comment_status":"open","ping_status":"closed","template":"","market_insights_categories":[14],"class_list":["post-20042","market_insights","type-market_insights","status-publish","has-post-thumbnail","hentry","market_insights_categories-weekly-outlook"],"acf":[],"yoast_head":"\nA K-Shaped Economy, Sticky Inflation, and a Bullish EUR\/USD Triangle - Alchemy Markets<\/title>\n<meta name=\"description\" content=\"The U.S. economy continues to show K-shaped dynamics as growth remains concentrated while the job market softens. 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