2022-11-21 08:10:00


Narrativeis all about a Global recession amidst persistent Global inflation - China Covid curbs just exacerbate the same .

However , big question this week is not about Fed but about Russian oil price cap and what level  G7 would set. Previously, $60 has been floated and perhaps even lower. Russia is already selling at discount to brent so can`t rule out $50 or $55. Worry is more  about  diesel as European import ban comes into effect.

Recession fears amid deep inversion in UST yields 2yr/10yr weigh.South Korea exports y/y fell hard in the first 20 days of Nov.(Semiconductor sales -29.4%)

Low key start to the week looks set to extend.Markets very thin -Tokyo holiday Wed, US Thanksgiving Thursday. U.S. data includes durable goods, flash PMIs, UoM sentiment and new home sales.Minutes from Nov FOMC Wed & Fed speakers crucial this week.Close above 107.21 10 dma would settle debate in favour of Dollar.

What happens in China reverbrates in Europe .This week`s  data :flash PMIs, cons confidence, Ifo and Q3 GDP. Blame game as Ukraine nuclear plant shelled -potential disaster.EUR/USD resists gravitational pull.EUR/USD down a small leg .Germany`s IG Metall union agrees below-inflation pay deal- containable wage pressure.Yield spreads moves too  hit euro, 10yr UST +7bp to 3.833%, 10yr bund -2bp 2.018%. Stop at 1.0400 for parity .

China’s holdings of US Treasuries continue to fall. Now down almost $400B from peak levels.China`s losing battle against COVID - 5-day lockdown of Guangzhou district may portend more curbs. China still reluctant to broadly cut rates.USD/CNH builds on gains, last at 7.1685, heading for 7.1818., which could signal sustained USD rise past 7.2000 barrier.

UK`s 41-year CPI high vs retreating US`s CPI - Tightening of fiscal policy some offset for BoE, though more so Longterm
UK eurosceptics warn UK govt against Swiss-style ties with EU -UK must find a Northern Ireland compromise with  EU to boost trade.1.2038, 50% 2022 fall capped last week.1.1763 10 dma and Thursday`s 1.1764 base support.

Global recession vs Persistent Inflation and higher yields - so USDJPY stuck below the key 100-dma .USD/JPY 140.17-41 so far in Asia, Friday range 139.63-140.49-
Japan`s main data releases are flash PMIs and Tokyo CPI.

Reserves revaluation shows the stubbornly bearish view that  reserve manager holds . Bulletin shows Net forward dollar holdings was $10.42 billion as of Sept  ($20.16 bio as of Aug). Lower oil not a panacea as the global growth is the major headwind Resistance 81.86 50% fibo (83.27 to 80.44)- break to test  82.19 ( 61.8%)