THE CURVE 

There are two rounds of US payrolls and CPI data before FOMC on September 21. With the Fed in a data-dependent mode, it could be too early to conclude its hiking pace before traders can digest the next run of essential data releases which support the Fed’s dual mandate.

Though some high-frequency data suggest employment and inflation have softened in some parts of the economy, markets may wonder if they are soft enough to change the course for the Fed. I suspect yields and curves in this setup will likely bounce in a range before a new data-dependent trend is confirmed.

FOREX

GBP

The Bank of England’s gloomy decision to hike the bank rate by 50bp shares the same problem as the European Central Bank. The unenviable task of tackling increasingly acute cost-push inflation against the expected drop-off in economic growth.

The UK’s consumer-driven economy is set for an unprecedented squeeze in real incomes as hiking rates into a slowdown will tighten consumer purse strings further and is GBP negative.

The UK policy outlook is further clouded by the Conservative Party leadership contest, which could drive increasingly pro-cyclical BoE actions depending on the fiscal stance of Boris Johnson’s successor.

THB

USDTHB spot is taking another leg lower this morning. Bearish THB bets cut and run after tourist arrivals into Thailand topped one million for the first time since the pandemic began.

It looks like long liquidations are going through in spot and the curve, which makes a move all that more convincing.

Stephen Innes

Managing Partner
SPI ASSET MANAGEMENT