In a week that saw the broader market’s 2023 pivot hope dashed, investors are examining the overnight movement with great detail to determine if the collapse in risk sentiment is part of a larger and more complex darker economic issue or, with the significant risk events behind us, will investors see calmer waters into year-end.
If Powell started the hawkish wheels in motions, Lagarde was the coup de grace which sent short seller ruthlessly running roughshod through the global pivot camps. Indeed investors will now need to deal with a hawkish send-off to 2022 that could last well into 2023
And with global economic data undershooting expectations, it’s not a stretch to think investors may shift their focus from inflation and the Fed to the growing impact that the Fed’s actions are likely to have on the economy as the tweak 2023 playbooks.
With the typically indulgent US consumer tightening their pursestrings against the backdrop of the Fed higher for longer manta, it certainly tempting markets to join here comes the stagflation camp.
The fall in US retail sales, where the resilience of the US consumer has underpinned US gasoline demand through thick and thin The drop is a worrying telltale sign of possible demand destruction coming to a gasoline station near you.
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The dollar is offering few clues today, with highly traded EURUSD showing little direction, with central banks on both sides of the pond much more hawkish than expected. So maybe we could expect a battle of the pond to shape the currency market into 2023