Hunt repeals Truss’ mini-budget, Growth remains top priority for Xi Jinping, ECB seen ending its tightening cycle in February 2023.
October 18, 2022
GBP/USD 1.1351 GBP/EUR 1.1514 EUR/USD 0.9859 USD/CAD 1.3707 EUR/CHF 0.9794 EUR/SEK 10.9288 EUR/NOK 10.3706 EUR/DKK 7.4385 USD/ILS 3.5185 AUD/USD 0.6310 NZD/USD 0.5695 USD/SGD 1.4182 USD/JPY 148.98 USD/CNH 7.1972 USD/INR 82.2550 EUR/ILS 3.4688 GBP/ILS 3.9938 USD/ZAR 17.9782
Jeremy Hunt used his newly acquired role as chancellor to roll back almost all the governments ill-fated mini budget, however some lasting damage may have been done with a premium on the two-year swap rate, used to price a substantial portion of mortgages. Crucially, the average two- and five-year fixed mortgages remain above 6%.
The significant fiscal U-turn by the government could save $32 billion, with Hunt warning that further spending cuts will be needed in the weeks ahead.EUR
The ECB’s governing council is expected to debate the timing of quantitative tightening at its next meeting on October 27. ECB president Lagarde will likely reiterate at the press conference that the process will begin after interest rate normalisation has been completed. Current forecast sees the central bank ending its tightening cycle in February 2023, before bringing interest rates back to neutral territory.
Following on from the UK’s turmoil in September, fears are growing of the impact of surging borrowing costs in the post-covid energy crisis could trigger a fresh debt crisis. France and Italy are among some European nations which could see unsustainable debt trajectories unless they make painful fiscal policy changes.
Olaf Scholz extended the life of Germany’s three remaining nuclear plants to mid-April reversing previous decisions by his energy minister.USD
Joe Biden continues to downplay the chances of a recession, despite many macro-economic models suggesting otherwise. Biden did concede that any recession would be ‘very slight’, however markets have been expected that the hawkish and rapid tightening cycle that the Fed has committed to will weigh significantly on growth.
US industrial production is expected to remain largely unchanged through September eking out small gains of 0.1%. Meanwhile, homebuilder sentiment is expected to fall through October to 43 from 46 the month prior.ASIA/PACIFIC
The key takeaway from China’s party congress is that growth remains the top economic priority, however there is a strong tone focused on economic self-reliance and a technology independence which reflects the building trade tensions with the US. The speech also praised China’s covid zero stance, despite its ability to hinder China’s economic activity.ILS
Despite a worsening environment for technology focused companies, the TA-35 see technology emerging as the No. 1 industry making up almost 25% of the market. USDILS trades flat intraday.Data & Events
Germany ZEW Survey
ECB Makhlouf and Schnabel speak
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