The week started with intense fears over the possible collapse of China’s second-largest property developer, Evergrande. China’s central bank injected sufficient liquidity into the market and reassuring sounds came from China that Evergrande would not be allowed to fail. This allowed risk markets to turn around on Tuesday into Wednesday’s FOMC meeting. On Wednesday, Jerome Powell said that sufficient progress has all been ‘but met’ on employment and that sets up a lot of anticipation for October’s NFP print. It’s not one to miss!

Other key events from the past week

  • USD: Interest rate meeting, Sep 22: The Fed delivered a surprise in the press conference as Jerome Powell said that if the economy remains on track, then the tapering of asset purchases could be concluded by the middle of next year!
  • JPY: Interest rate meeting, Sep 22: The BoJ maintains policy settings as expected with the bank rate kept at -0.10% and 10yr JGB yield target at around 0%. The BoJ cut its assessment of output and exports. All as expected.
  • CNH: Impact of Evergrande, Sep 23: This week the HYCM blog discussed the potential wider impact of the Evergrande crisis. These implications were also unpacked in a media interview with Yahoo Finance during the week. See here.

Key events for the coming week

  • EUR: 2021 Bundestag election, Sep 26: Germany’s election is expected to result in a coalition Gov’t. However, be aware of potential EUR risk over the weekend if the election’s outcome is a surprise as the results start to come out on Sunday.
  • Seasonal trades: Southwest Airlines, Sep 27: Southwest Airlines has a very strong time of the year right now. Over the last 10 years, Southwest Airlines has gained 90% of the time between Oct 01 and Dec 07. Check out the strong seasonal pattern here.
  • USD: US Inflation, Oct 01: One area many analysts are focusing on is that of high inflation. If inflation is seen as rising too fast too quickly, then that could call into question the Fed’s ‘inflation is transitory’ narrative. It could also mean the Fed raise interest rates sooner and that would boost the USD. Be alert!

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