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.