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  • richard evans

Attention on Biden/Xi meeting this morning

Good morning

A great weekend, spent partly watching sports but mostly enjoying, and subsequently recovering from, my esteemed colleague Marks 50th birthday celebrations. Congratulations to him. Congratulations also to the England crick team that won the T20 world cup. Disappointment for the mens rugby league and womens rugby union teams who failed in their semi-final and final respectively. England have made the final of the wheelchair rugby league world cup. A lot of rugby going on at the moment.

The end of last week saw a continuation of the weak US dollar theme, with most majors making further ground. GBPUSD was up at 1.1840, EURUSD 1.0350 and USDJPY down in the mid-138s. Several banks are updating their forecasts, HSBC notable in saying USD has turned and they expect continued USD weakness through 2023 as the Fed rate rise cycle ends. We aren’t talking massive moves, GBPUSD to 1.2500 by Q4 2023, EUR up to 1.1000, but significant nonetheless. All sounds a bit too easy for me but I can see the sense in what they say. They seem to ignore the fact that everyone else’s rate rise cycle could well end as well, and see rates peak much lower than US rates.

Feds Waller has been speaking and sounded hawkish, saying the recent CPI data is just one release and the market is getting ahead of itself in thinking Fed will slow, instead he wants to see a string of lower4 CPI reading before he is confident they can change thinking although as Powell said, we should see rates increase at a slower pace.

FTX filed for bankruptcy which is no major surprise but serves as a painful reminder for some that even the biggest crypto firms are not immune from disaster. Allegations of fraud to follow for the ex-head of the firm, known as King of Crypto’, who at the start of last week had a net worth around $15bn, I’m not sure how much this has declined by the collapse of his company. Plenty of talk of how to regulate the crypto world doing the rounds but I always thought the whole idea was that it was unregulated. Will people learn their lesson?

China have ‘adjusted’ some of their Covid rules which look very much like a gradual easing of restrictions such as shortening quarantine for two days and stopping tracing of certain contacts of Covid cases. China say these are not relaxing rules, but instead they are improving them according to changes in the epidemic situation. Plenty of confusion over whether this really is the start of a major change in policy. I still think it will be a long road to a complete reopening but these changes are always a welcome step in the right direction. CNY did strengthen and held those gains since the opening this morning.

Biden and Xi meet this morning as the G20 begins, this is their first meeting since Biden became President and there is hope the meeting will be friendly or at least cooperative. Not sure whether Taiwan or Ukraine/Russia will be on the agenda, perhaps we’ll find out later. As we know China have little interest in being told what to do and certainly wouldn’t appreciate any ‘help’ from US over Taiwan or human rights but we hope both leaders have an interest in keeping relations stable as best they can.

USD started the week slightly stronger but just as I come to the end of this piece it has turned again, EURUSD now 1.0340 and GBPUSD 1.1830. We have some central bank officials speaking through the day but not much in the way of data unless you’re going to be awake through the night.

- 10.00 EU industrial production

- 10.00 ECBs Panetta speaks

- 16.15 ECBs du Guindos speaks

- 16.30 Feds Brainard speaks

- 18.00 ECBs Nagel speaks

- 23.30 Feds Williams speaks

- 23.50 Japan GDP

- 00.30 RBA minutes

- 02.00 China retail sales, industrial production

- 04.30 Japan industrial production

- 07.00 UK unemployment

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