Senior Relationship Manager
Summary: Welcome to Central Bank Week
Good Morning
Welcome to Central Bank Week
On Wednesday, the FOMC will release it`s rate decision and outline it`s considerations in the press conference. On Thursday the Fed will be followed by the Swiss national Bank and the Bank of England. What is expected?
Fed: +0.75% with 79% Probability, 1% with 21% probability
SNB: +0.75% with 60% Probability, 1% with 40% probability
BoE: +0.5% with 57% Probability, 0.75% with 43% probability
Ahead of the FOMC there are few significant economic releases, the Japanese and the Canadian CPI would need to surprise to have a real impact, as all eyes are on the Fed.
Today the UK will say goodbye to Queen Elisabeth II and markets will be closed.
Stocks lost heavily last week, the S&P lost 4.77%, the Dow Jones 4.14%, and he Nasdaq 5.48%. the GER40 looks like it will test the 12400 support. We are currently at 12720.
The USD Index is trading at 110, GBPUSD just below 1.14, EURUSD below parity and the Yen at 143.35. Gold and Silver have found some support, Gold at 1660 to trade at 1665, Silver could gain from below 19 to 19.40.
Worries that the central banks will hike too aggressively into a recession seem to drive equities lower while FX traders are uncertain in the short term. Goldman Sachs answers the question on how high rates will go with: "Our answer is high enough to generate a tightening in financial conditions that imposes a drag on activity sufficient to maintain a solidly below-potential growth trajectory." They see the Fed to hike 75 basis points this week and 50 November and December.
U.S. President Joe Biden said U.S forces would defend Taiwan in the event of a Chinese invasion
FedEX tumbled 21.4% on Friday.
VW is seeing a valuation of Porsche at €76 bio, let us see if an IPO of a luxury car maker is a great idea in a recession
Expiries
Physically Settled Futures:
CADUSD - Sep 2022 (CDU2), E-micro CAD/USD - Sep 2022 (MCDU2) will expire 19th Sep 15:00 GMT
Light Sweet Crude Oil (WTI) - Oct 2022 (CLV2) will expire 20th Sep 15:00 GMT
Expiring CFDs:
PLATINUMOCT22 will expire 21st Sep 15:00 GMT
Bond. Long Bond(s)
With real rates being too positive, we see three scenarios: Opportunity to lock in rates at cycle high, government overreach to keep the economy afloat or a complete reset of the economy.
Steen Jakobsen,
Chief Investment Officer
Is a bond bull market ahead? Inflation still poses a risk for investors, but the moment for increasing duration to your portfolio may be approaching towards the end of the year, when central banks might be forced to cut interest rates.
Althea Spinozzi,
Senior Fixed Income Strategist
The furious rate hike cycle has brought gains in the US dollar, but with stagflation risks in Europe and the UK and weakness in the Chinese economy, USD may have more room to run. But a strong dollar could also have repercussions for US growth, emerging markets and commodity prices.
Charu Chanana,
Market Strategist
With the cost of capital rising painfully, stagflation fears are back, illuminating the fragile state of the green transformation, while giving a tailwind to nuclear power, and threatening the growth of AI-related stocks.
Peter Garnry,
Head of Equity Strategy
With supply tightness not only in energy but all commodities, the momentum in commodity prices may continue, pressuring central banks to lower real rates. That could be a good setup for precious metals, including gold, silver and potentially platinum as well.
Ole S. Hansen,
Head of Commodity Strategy
As the pandemic showed, even the US Treasury can experience seismic shifts. With the government increasing the pace of issuing bonds to support fiscal spending, the complex Treasury market and regulatory constraints could spark a liquidity event.
Redmond Wong,
Market Strategist
The tide has turned for bonds. Given the current yields, bonds have become an attractive investment, with added benefits including lower risk than stocks, increased diversification and a steady stream of income unaffected by economic changes.
Peter Siks,
Investment Coach