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  • richard evans

Possible Taiwan visit upsets markets

Good morning

Talk is that Pelosi will visit Taiwan today and meet with Taiwans President Wednesday, despite China’s warnings or serious consequences should the visit take place. There still seems to be some doubt that the visit will go ahead and the White House has said it will be her decision if she goes. US ships are in the area and China are conducting military drills, the fear of some sort of confrontation is high. As I said yesterday, my concern is that the visit will encourage military action from China, maybe not immediately but at some point soon. The chance of them doing nothing is slim, however it may be possible for US to play down the visit by insisting publically that they are not backing independence for Taiwan.

Asian equities are generally lower as risk sentiment fell, USDJPY fell with it, reaching a low of 130.40, taking EURJPY to 134.00 and GBPJPY below 160.00, currently 159.70. USD is higher with EURUSD down at 1.0220 and GBPUSD at 1.2200, having seen highs overnight of 1.0295 and 1.2280 respectively. GBP still holds up against EUR, currently 1.1930.

RBA raised rates 50bps to 1.85% as widely expected but AUD has dropped sharply after RBA made it clear that although further rises are expected they are not on a preset rates path. They revised their GDP forecasts sharply lower for 2022 and 2023, while pushing inflation forecasts higher. AUDUSD had been up at 0.7020, now trades 0.6935, AUDNZD fell from 1.1090 to 1.1030, while GBPAUD has traded up to 1.7600 from 1.7465.

Little in the way of economic data data today, but we do have a couple of Fed speakers and it will be intersting to hear whether they seem more concerned with higher inflaiton or possible slowing growth. The market is certainly fearful of the risk of a slowdown, for now it seems the Fed remain focussed on rate rises to being inflation down. Despite all of that, the Taiwan situation is likely to be high on the agenda and the markets are certtainly on edge.

Finally, from one island to another. Love Island finished yesterday with Davide and Ekin-Su announced as winners. They had been firm favourites at the bookies for some time so the result was not a surprise. Even if you have no interest I’ll be surprised if you don’t see or hear those names in the coming days as the media storm arrives. As usual, highly liekly to be short-lived but they’ll get more than their fifteen minutes of fame. Good luck to them, they had been reasonably entertaining, more so than the others. Wherther they deserve their £50,000 pay check I really can’t say.

- 14.30 CAD S&P manufacturing PMI

- 15.00 Feds Evans speaks

- 15.00 US JOLTS job openings

- 23.45 Feds Bullard speaks

- 23.45 NZ unemployment

- 00.00 AUS S&P services PMI

- 02.45 China caixin services PMI

- 07.00 German trade balance

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