Plethora of rate hikes complemented by some FX intervention in session

Notes/Observations

- Fx pairs are highly volatile after a collection of rate hikes as Central Banks front-load rates to aggressively tackle inflation.

- In the session Philippines (50bps hike), Indonesia (aggressive 50bps hike), Taiwan (+12.5bps hike), Swiss (75bps, as expected) and Norway (50bps hike, as expected).

- Japan's Top Fx Diplomat Kanda confirmed that the MOF intervened in the FX market, triggering a collapse of the USD/JPY from 145.8 to 140.8. Marked the first purchase of JPY for intervention since 1998.

- In general, risk appetite has been triggered throughout European and American major indices following a weaker USD.

- UK Business Sec confirmed the Govt has lifted the shale gas ban in an attempt to explore all avenues for energy, including solar, wind, oil and gas.

- Asia closed mostly lower with Hang Seng under-performing at -1.6%. EU indices are mostly lower by 0.0-0.5%, with bond yields also lower. US futures are 0.4% higher. Gold +0.2%, DXY +0.1%; Commodity: Brent +1.0%, WTI +1.2%, UK Nat Gas +0.2%; Crypto: BTC +1.6%, ETH -3.3%..

- Looking ahead, awaiting further rate decisions from UK BoE (consensus 50bps hike), Turkey (consensus unchanged), South Africa (consensus 75bps hike), Egypt (consensus hike).

Asia

- Bank of Japan (BOJ) left policy steady with Interest Rate on Excess Reserves (IOER) unchanged at -0.10% and 10-year JGB yield target maintained around 0.00%.

- Japan Top FX Diplomat Kanda stated that it had yet to intervene in FX market and would not necessarily comment on market intervention; Might be cases to conduct stealth interventions.

Ukraine conflict

- EU Foreign Policy Chief Borrell stated that EU ministers agreed that additional restrictive measures against Russia to be created as soon as possible (aka new sanctions).

- NATO Sec Gen Stoltenberg: stated that NATO and allies were in close consultation with the defense industry to ramp up production of weapons and ammunition. Putin's military mobilization was dangerous and reckless.

Europe

- German Finance Ministry Monthly Report: Tax revenues at €54.21B, -2.6% y/y (*8Note: 1st decline this year).

Americas

- FOMC raised its Target Range by 75bps to 3.00-3.25% (as expected) with the vote being unanimous. Remained highly attentive to inflation risks, strongly committed to returning inflation to 2%.

- Fed dot plot showed rate forecasts revised higher with median rate at 4.4% to end 2022 and a 4.6% terminal rate in 2023. Core inflation revised higher for 2023.

- Fed Chair Powell press conference firmly reinforced resolve to curbing inflation while acknowledging economic tolls in the process.

- Brazil Central Bank (BCB) left its Selic Target Rate unchanged at 13.75% (as expected) for its st pause in 13 decisions in the current tightening cycle. Vote was not unanimous; Two directors dissented and called for 25bps hike.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.26% at 405.98, FTSE +0.03% at 7,239.75, DAX +0.02% at 12,771.00, CAC-40 -0.21% at 6,018.51, IBEX-35 +0.22% at 7,889.74, FTSE MIB +0.59% at 22,166.00, SMI +0.29% at 10,459.98, S&P 500 Futures +0.70%].

Market Focal Points/Key Themes: European indices open lower across the board but later recovered somewhat through the early part of the session; better performing sectors include consumer discretionary and telecom; sectors among those leading to the downside include real estate and financials; DKSH acquires terra Firma; focus on BOE meeting later in the day; earnings expected in the upcoming US session include.

Equities

- Consumer discretionary: JD Sports Fashion [JD.UK] -4% (earnings).

- Energy: Uniper [UN01.DE] +3% (continues to digest German govt nationalization plan).

- Financials: Deutsche Bank [DBK.DE] +2.5% (CFO comments), Credit Suisse [CSGN.CH] -1% (split speculation; SNB raises rate).

- Healthcare: Novartis [NOVN.CH] -1.5% (strategy update), GSK [GSK.UK] -1% (acquisition).

- Technology: DKSH [DKSH.CH] +2% (acquisition), Playtech [PLAY.UK] -3% (earnings).

Speakers

- SNB Policy Statement reiterated stance that was prepared to intervene in Fx-markets if needed. Could not be ruled out that further increases in policy rate to ensure price stability over medium-term.

- SNB President Jordan post rate decision press conference reiterated that inflation remained elevated and further increases in the policy rate could not be ruled out. Reiterated stance that willing to intervene against excessive weakening or strengthening of Franc moves. Noted that a strong CHF currency to help dampen inflation pressure.

- SNB updated its Staff Projections which cut Cuts 2022 GDP growth forecast from 2.5% to 2.0% and set the 2023 GDP outlook at 3.0%. It raised the 2022 CPI forecast from 2.8% to 2.8% and raised 2023 CPI from 1.9% to 2.4% (both above target level) but saw inflation back within target in 2024.

- ECB Economic Bulletin reiterated that Governing Council expected to raise interest rates further as inflation remained far too high and was likely to stay above its target for an extended period.

- ECB’s Schnabel (Germany reiterated stance that inflation might accelerate further in the short term and must continue with rate hikes.

- Norway Central Bank Policy Statement Policy Statement reiterates forward guidance of rate likely to be raised at the upcoming Nov meeting. Might suggest a more gradual approach to policy rate setting ahead.

- Norway Central Bank (Norges) Gov Bache post rate decision press conference stated that low and stable inflation promoted employment.

- Japan top FX diplomate Kanda confirmed that MOF had intervened in currency market (1st intervention to stop JPY decline since 1998).

- Czech Central Bank's Zamrazilova stated that chances of CPI going reliably to 2.0% this year were negligible and would not likely to go for rate cut in 2022. No inflationary information appeared since last meeting but faster wage growth could spur another rate hike.

- BOJ Gov Kuroda post rate decision press conference reiterated stance that to maintain powerful monetary easing until inflation target was achieved and would not hesitate to add if necessary. Domestic economy was picking up and expected to continue to recover; consumption was slowly increasing. Expecting underlying price pressures to rise. Weak JPY currency (Yen) impacted varies on different sectors but the weakness had been one-sided. Was not expecting Govt to address the weakening yen. Reiterated that BOJ would not raise interest rates at this time but would not rule out possibility of altering forward guidance in the future.

- Japan Chief Cabinet Sec Matsuno reiterated stance that currency market moves had recently been extreme and stressed that it was important for FX market to move stably.

- Philippines Central Bank Policy Statement stated that was prepared to take all necessary actions to steer inflation towards target consistent path. Inflation to breach target with balance of risks tilted to the upside until 2023. Recognized need to follow through actions to anchor expectations with monetary policy decision to be data-dependent. Intention was not to target any particular level of exchange rate but stood ready to participate in forex market to reduce volatility.

- Philippines Central Bank updated its Staff Projections which raised the 2022 CPI forecast from 5.4% to 5.6% and also raised the 2023 CPI forecast from 4.0% to 4.1% (above target range).

- Indonesia Central Bank (BI) Policy Statement noted that the Decision to hike by 50bps was a preemptive move to lower inflation and aim to strengthen IDR currency (Rupiah) amid global uncertainty.

Currencies/fixed income

- USD initially continued to hit multi-year highs against a basket of currencies following the Fed rate hike but its strength was sapped before the mid-day as Japan intervened in the FX markets.

- USD/JPY was initially back above pre-rate check level after BOJ kept its policy steady (as expected). BOJ was now the last central bank with negative rates. BOJ Gov Kuroda added that he was not expecting Govt to address the weakening yen. However, the yen strengthened almost 500 pips after Japan top FX diplomate Kanda confirmed that MOF had intervened in currency market (1st intervention to stop JPY decline since 1998). Pair moved from 145.90 to dip below 141.00 area before retrancement. The move by Japan currently cements the 150 level as a major, major resistance in the pair.

- USD/CHF was higher after the SNB delivered a 75bps rate hike to bring its rates out of negative territory. CHF weakened as market were looking for a move aggressive stance from the SNB. Dealers noted that SNB did not give the kind of clear signals from the European Central Bank that it intends to increase interest rates at the next several meetings.

Economic data

- (NO) Norway July AKU Unemployment Rate: 3.1% v 3.2% prior.

- (DK) Denmark Sept Consumer Confidence: -32.1 v -25.1 prior.

- (HU) Hungary Q2 Current Account:-€2.6B v -€2.0Be.

- (FR) France Sept Business Confidence: 102 v 102e; Manufacturing Confidence:102v 102e; Production Outlook Indicator: -6 v -5e; Own-Company Production Outlook: 9 v 7e.

- (PH) Philippines Central Bank (BSP) raised Overnight Borrowing Rate by 50bps to 4.25% (as expected).

- (TR) Turkey Sept Consumer Confidence: 72.4 v 72.2 prior.

- (HU) Hungary Aug Unemployment Rate: 3.6% v 3.5%e.

- (HU) Hungary Central Bank left One Week Deposit Rate unchanged at 11.75% (as expected).

- (ID) Indonesia Central Bank (BI) raised the 7-day Reverse Repo Rate by 50bps to 4.25% (more-than-expected).

- (CH) Swiss National Bank (SNB) raised its Key Rates by 75bps and out of negative territory (as expected).

- (NO) Norway Central Bank (Norges) raised Deposit Rate by 50bps to 2.25% (as expected).

- (TW) Taiwan Aug Unemployment Rate: 3.7% v 3.7%e.

- (TW) Taiwan Aug M1 Money Supply Y/Y: 7.6% v 6.7% prior; M2 Money Supply Y/Y: 6.9% v 7.0% prior.

- (HK) Hong Kong Aug CPI Composite Y/Y: 1.9% v 2.0%e.

- (HK) Hong Kong Q2 Current Account Balance: $B v $79.0B prior; Balance of Payments (BOP): -$159.8B v -$52.5B prior.

- (TW) Taiwan Central Bank (CBC) raised Benchmark Interest Rate by 12.5bps to 1.625% (as expected).

- (BE) Belgium Sept Consumer Confidence: -27 v -11 prior.

- (IL) Israel Sept 12-month CPI Forecast: 2.9% v 2.8% prior.

- (IL) Israel Aug Leading “S” Indicator M/M: +0.1% v -0.1% prior.

Fixed income issuance

- None seen.

Looking ahead

- (EG) Egypt Central Bank Interest Rate Decision: Expected to raise Deposit Rate by 50bps to 11.75%.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 5-year, 10-year and 15-year bonds.

- 06:00 (IL) Israel Aug Unemployment Rate: No est v 3.4% prior; Unemployment Rate (including Covid Effect): No est v 4.9% prior.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (UK) Bank of England (BOE) Interest Rate Decision: Expected to raise Bank Rate by 50bps to 2.25%.

- 07:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to leave One-Week Repo Rate unchanged at 13.00%.

- 07:30 (CL) Chile Central Bank (BCCh) Sept Minutes.

- 08:00 (PL) Poland Aug M3 Money Supply M/M: 0.3%e v 0.7% prior; Y/Y: 6.1%e v 6.2% prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:30 (US) Q2 Current Account: -$260.0Be v -$291.4B prior.

- 08:30 (US) Initial Jobless Claims: 217Ke v 213K prior; Continuing Claims: 1.418Me v 1.403M prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Sept 16th: No est v $557.4B prior.

- 09:00 (ZA) South Africa Central Bank (SARB) Interest Rate Decision: Expected to raise Interest Rates by 75bps to 6.25%.

- 10:00 (US) Aug Leading Index: -0.1%e v -0.4% prior.

- 10:00 (EU) Euro Zone Sept Advance Consumer Confidence: -25.5e v -24.9 prior.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:00 (US) Sept Kansas City Fed Manufacturing Activity Index: 5e v 3 prior.

- 11:00 (DE) ECB’s Schnabel ( (Germany).

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:00 (CA) Canada to sell 5-year Bonds.

- 13:00 (US) Treasury to sell 10-Year TIPS Reopening.

- 15:00 (AR) Argentina Q2 Current Account: No est v -$1.1B prior.

- 17:00 (KR) South Korea Aug PPI Y/Y: No est v 9.2% prior.

- 19:00 (AU) Australia Sept Preliminary PMI Manufacturing: No est v 53.8 prior; PMI Services: No est v 50.2 prior months; PMI Composite: No est v 50.2 prior.

- 19:01 (UK) Sept GfK Consumer Confidence: -42e v -44 prior.

- 22:35 (CN) China to sell 7-year Bonds.