DAILY MACRO
With a minor fall in global money supply, no substantial reduction in central bank balance sheets, and extremely gradual rate hikes announced for months on end, markets have plummeted- markets cannot accept even minor changes as they require another fix, a large and steadily increasing fix. As of now it does not seem likely . Hence Overarching theme of strong Dollar is set to carry on into 2023.
White House National Economic Council chief Deese played down the need for a Plaza-type FX accord to counter Dollar strength. (Incidentally it was in the last week of Sept 85 ,that agreement was reached). Yellen suggested there was little cause for concern with current moves in financial markets.
Though strong, above forecast U.S. single-family home sales & consumer confidence also displayed modest signs of disinflation.
Risk off in Asia, in response to surging yields in EZ and U.S. USD index still strong for 121 test .
EM would bear the cross now - MSCI`s EM/FX index plunges below 1597 (76.4% 2020-21 gains).Drop to 2020 low at 1547 on cards - today`s low 1586
Increasing energy insecurity threatens significant losses for businesses & soaring costs for consumers & governments trying subsidize energy costs.EUR/USD below Tuesday`s 0.9570 low with support at Monday`s 0.9528 low.
The 14 contributing banks had been asked to start including CCF or X-factor and this tweak could happen in coming days. Panic sets on this news .USD/CNY to 7.2300 from close 7.1800;Rise in midpoint lifts daily band to 7.2529.Momentum buying triggers 7.2000 breach.7.5000 easily gettable .
Headlines underline markets scepticism with UK`s mini budget- Moody`s warns UK unfunded tax cuts `credit negative`.BoE`s Pill affirmed Bailey`s hawkish response to mini- budget . Market now pricing in 135bp of hikes by Nov, 228bp by Dec and a 6.3% peak.BoE farther behind the inflation curve.
Sterling sellers return .Parity beckons.
BOJ`s YCC JGB buying makes long USDJPY trades safe - interventions are not going to come sny time soon.Consolidates below last week`s 24-year peak of 145.90 and near 145 expiries before taking on Japan`s MOF and pushing toward 1998`s 147.63 high. (145 is the 100% Fibo of August`s base, and the 161.8% primary target is at 149.52)
Current account numbers on the cards - but there is a legion of economists to twist the numbers to hide the problem - sad to see that there is no realistic assessment - ploughing with obsolete narratives . If you can`t learn a lesson after $120 bio wasteful spend, what could make them see reason ? .Weak sentiment & unchartered territory -Stay long for next 82.80.