Morning Brew November 18 2022
Senior Relationship Manager
Summary: Consolidatoin mode
Markets are clearly looking for direction and did not find it yesterday. Stocks swung and closed a little lower in low volumes, the USD Index continued to trade around 106.50 and the 10 year yield 3.75.
EURUSD trades near the 1,04 at 1.0378 USDJPY at 139.80 and GBPUSD at 1.39. Gold and Silver recovered off yesterday’s lows to trade 1765 and 21.15.
The US yield curve remains firmly inverted, hinting at a recession, the probability of a hike by only 50 basis points in December has risen to 87% but the terminal rate expectation n May/ June has risen to 5% from 4.9 earlier in the week.
Today’s calendar contains little of note, there can be comments out central banks and politics at any time though.. One of the key events today will be might be the ECB which is beginning the biggest withdrawal of cash from the euro zone's banking system in its history, as it gives banks a first chance to repay hundreds of billions of euros in ECB loans. As this is the first time this is being undertaken, the market impact is not fully clear. It could give an indication of the state of the European economy.
The next really huge day to already pencil into the calendar is the 14th nd 15th of December, where the Fed, the SNB, the BoE and the ECB will set rates, up to then, economic indicators confirming inflation and strenght of the labor market will be wathed.
James Bullard of the St. Louis Fed President stated the Fed needs to keep raising rates given that its tightening so far "had only limited effects on observed inflation."
Cisco rose 5% after the company raised it`s forecast
Latest Market Insights
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.