The Bank of Japan intervened to strengthen the Yen, the Federal Reserve statement affirmed bullish STIR markets pricing for the USD, the Swiss National Bank disappointed markets with a 75bps hike (vs 100bps expected), and the Bank of England delivered a more conservative 50bps hike. This was all in the space of 24 hours. Moreover, Russia escalated its mobilisation of troops for its offensive into Ukraine with the calling up of 300,000 reservists coupled with a thinly veiled threat of a nuclear response to the West. It is hard to imagine a more eventful week and both risks, as well as opportunities, abound in markets at these times.
Other key events from the past week
USD: Fed rate decision, Sep 21: The Fed hiked by 75 bps to 3.00-3.25% and Jerome Powell delivered a significant hawkish message expanding the terminal rate to 4.6% for 2023, up from 3.8% prior. However, is the USD at its peak now?
GBP: BoE rate decision, Sep 22: The Bank of England raised the base interest rate by 50bps this week, but that was lower than the 75bps some economists were expecting. Will the GBP keep tracking lower now or has all the bad news been priced in?
JPY: BoJ rate decision, Sep 22: The BoJ met and kept both rates unchanged and yield curve control. However, early on Thursday in the European session, the BoJ intervened in currency markets sending JPY pairs sharply lower.
Key events for the coming week
China: PMI relief? Sep 30: China’s stock market has been pressured due to China’s slowing economic outlook weighed down by the property crisis and China’s Covid Zero policy. Will positive PMIs be able to ease these concerns?
USD: Inflation in focus! Sep 30: After the very high inflation print on September 13 markets will be very sensitive to any signs that inflation is falling. Expect a big miss here to relieve some of the pressure on the Fed to hike rates so aggressively and potentially weaken the USD.
High-Risk Investment Warning: Contracts for Difference (‘CFDs’) are complex financial products that are traded on margin. Trading CFDs carries a high degree of risk. It is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved. Seek independent expert advice if necessary and speculate only with funds that you can afford to lose. Please think carefully whether such trading suits you, taking into consideration all the relevant circumstances as well as your personal resources. We do not recommend clients posting their entire account balance to meet margin requirements. Clients can minimise their level of exposure by requesting a change in leverage limit. For more information please refer to HYCM’s Risk Disclosure. *Any opinions made in this material are personal to the author and do not reflect the opinions of HYCM. This material is considered a marketing communication and should not be construed as containing investment advice or an investment recommendation, or an offer of or solicitation for any transactions in financial instruments. Past performance is not a guarantee of or prediction of future performance. HYCM does not take into account your personal investment objectives or financial situation. HYCM makes no representation and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast, or other information supplied by an employee of HYCM, a third party, or otherwise. Without the approval of HYCM, reproduction or redistribution of this information isn’t permitted.