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Wild, Wild Swings following US CPI, Risks in London Rise


14 October 2022 Written by Stuart Cowell  HF Markets Head Market Analyst Stuart Cowell

USDIndex – Spiked to 113.80 following hot reading for CORE CPI and then reversed sharply into 112.20 as Stocks staged a record reversal (from -3% to +over 2%)  on short covering, technical floors being tested and ? perhaps assumptions that the top is finally in for inflation (Headline fell for 3rd consecutive month). Yields also whipsawed, with at one point, all major maturities above 4%. (US 10yr closed 3.902% &  the 2/10 year rate inversion {a sign of recession} sits at 51bp).  75 bp fro Nov 2 fully priced in, and a 71% chance of a further 75bp in December. (This will take hikes since March to 450 bp). 

The UK’s new  fiscal policy remains squarely under threat as Chancellor Kwarteng returns from the IMF meetings a day early (last person to do that was the Greek Fin. Min. in 2011 and many are predicting a similar outcome both politically and economically). The BOE’s Bond-Buying programme ends today, uncertainty swirls as tax U-turns become priced in. Sterling rallied and then rallied again, but Gilts remain  fragile. Asian markets follow Wall Street higher (Nikkei +3.25% Hang Seng +2.64%) & European FUTS also higher.

Today – US Retail Sales, US University of Michigan Prelim Survey, Speeches from BOE’s Bailey, Fed’s George, Cook & Waller. Earnings from Wall Street banks JPM, Citi, MS Wells Fargo. Biggest FX Mover @ (06:30 GMT) NZDJPY (-0.96%) rallied from sub 81.20 lows yesterday to 83.75 highs today.  MAs aligned higher,  MACD histogram & signal line positive & rising,  RSI 70.00, OB & rising, H1 ATR 0.186, Daily ATR 3.201. 

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