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  • richard evans

Fed turning slightly dovish? Japan intervention? Sunak to be PM?

Good morning

What a difference a day makes! US dollar was flying high Friday when an article in the WSJ by Timiraos appeared which suggested that while Fed were on track to deliver another 75bps rate move in Nov, some members were looking to then slow the pace of increases to minimise the risk of causing a sharp slowdown. This was very different to the message that they had been giving in recent weeks and as a result the US dollar took a bit of a tumble. GBPUSD traded up to 1.1300, EURUSD to 0.9870 and gold leapt from a low of around $1617 to be in mid $1600s by the close.

At the same time USDJPY fell back from 151.60 to a low later in the afternoon of 146.20, a move which looked a lot like intervention but was lacking any official confirmation, and with other currencies also pushing higher against USD it really wasn’t clear, despite the scale of the move. In the early hours of this morning however, BoJ do seem to have been buying yen again, taking the pair down in a straight line from 149.70 to 145.50. This has not stopped USDJPY making its way higher again, now back to 149.00. Acting unilaterally seems to have less and less impact, although will make people possibly think twice about selling yen at new USDJPY highs.

Boris Johnson has decided to not stand for PM, leaving the door open for Sunak to become PM, possibly even today if no one else gets the required number of backers. GBP did pop higher on the open, GBPUSD traded above 1.1400 at one point, although has slipped back to 1.1325 as I type but a long way off Fridays lows at 1.1060. GBPEUR hit 1.1545 overnight, now at 1.1510, a similar performance from GBP in the crosses. Moodys has lowered UK’s outlook to negative from stable but has kept its rating unchanged. Many of the headlines though are about whether Truss will claim her £115,000 ex-PM annual allowance. The decent thing of course would be to not do so, but I’d think she’ll skip it for a year or two and then start claiming it.

China’s Xi has held onto his post for a third term as President and Military Chief and in doing so seems to have set himself up with a one-man rule role, the top jobs around him have been filled with loyal followers. Hong Kong markets have been spooked, the Hang Seng down nearly 6.5%. Zero-covid looks set to stay and I do worry more about Taiwan than ever before, the feeling is Xi will want to unify during his leadership, through peaceful on non-peaceful means. Taiwan stocks remained pretty flat.

Some more worrying sounds from Russia, this time it is their defence minister who has alleged Ukraine are preparing a dirty bomb to use on their own land to release radiation, I presume to make it look as though Russia had gone nuclear, thereby escalating the conflict. We all know we shouldn’t believe much of what Russia has to say but we also know any use of the word ‘nuclear’ has dangerous connotations.

My U16s had their first win of season yesterday, a late goal giving us a 3-2 victory. I doubt they will be toughest opponents we will face this season but you can only beat the team in front of you. If only Spurs got that message!


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