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  • richard evans

Calm continues, but for how long?

Good morning


Despite the ongoing feeling that the Fed will stick with their rather aggressive rate rise policy, the US dollar seems to be a touch weaker against the majors this morning, unless we look at USDJPY which has continued to make ground above the 1998 highs and looks like heading on towards levels not seen since 1990.


Obviously a lot of attention on the shambles that is the UK government. With Hunt taking Kwarteng’s place, the obvious feeling is that Truss doesn’t have much time in office left herself, even though some headlines do suggest she has the support of the government. BoEs Bailey and Hunt spoke and seemed to agree that the aim is for fiscal sustainability, which should appease the markets somewhat. Bailey did add that we’ll need to see more rate rises and that compared to August the inflationary pressures point towards a stronger response than previously anticipated.


So the Fed and BoE are talking about the need to do more. Not to be left out, ECB have joined in as well with several ECB officials saying they must give up the inflation fight too soon (Nagel), rate rises must persist into 2023 (Kazaks), balance sheet reduction should begin when rates reach neutral (Knot), although Lane makes it clear that ECB are not announcing a target for rates, instead saying they will continue to act as appropriate. For the record EURUSD currently stands at 0.9750.


GBP is looking more comfortable with GBPUSD now 1.1275, and GBPEUR 1.1560, not far off the highs seen back in early Sept. In the crosses, GBPAUD at 1.8050, GBPJPY 167.50 and GBPZAR currently 20.50 although that has been up to 20.75 which marks a high since Feb 2022. It has had quite a rollercoaster since the start of the year, moving between high-21’s and high-18’s in this time. Eyes on UK gilt market given the BoE support has stopped but prices have firmed on the open, the risk of sharp declines seem to have diminished for the time being.


USDJPY now 148.60, just 20 pips or so off the highs,. Japanese officials are still saying they are watching yen closely and will act to stop excessive moves but once again they say this may come after the G7/G20 meeting where I would imagine they will ask for support, perhaps even coordinated action, from other central banks.


Not much on the calendar today other than central bank speaksers. I think UK Chancellor Hunt is talking at some point this morning confirming but I cannot find the exact time. He is still scheduled to announce the medium term fiscal plan at the end of October, likely of course to look very different from Kwartengs effort. Hunts changes must surely undermine Truss. Will she be in power when that fiscal plan is announced on 31st October?


A host of data will come out of China tonight. It comes after President Xi spoke at the party congress, who is certain to remain in power despite the fact it would be normal for him to step down after ten years at the helm. He reaffirmed China’s zero-Covid policy and spoke worryingly about the reunification of Taiwan. He did add he’d like that to be peaceful but would eventually take any measures necessary to achieve their aims. It wasn’t peaceful outside the Chinese consulate in Manchester, where a pro-democracy protestor outside was pulled into the consulate and beaten up before escaping.


Finally, sorry to say my U16s were dumped out of the county cup yesterday, losing 4-1 to a team who were certainly more ‘up for it’ than we were. Concentrate on the league instead I guess…..


- 15.30 CAD BoC business outlook survey

- 16.00 ECBs Lane speaks

- 19.00 US monthly budget statement

- 21.00 BoCs Rogers speaks

- 22.45 NZ CPI

- 01.05 RBAs Bullock speaks

- 01.30 RBA minutes

- 03.00 China trade, GDP, industrial production, retail sales



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