I suspect hard US economic data will be under the magnifying glass for the foreseeable future after the US consumers finally catch down, as they often do to the soft survey data. But the US may also be grappling with the peak Fed lag effect, which could weigh on immediate growth and even trigger a recessionary environment.


Hence the dollar remains on shaky ground as bad news finally means terrible news, especially in the context of the Fed downsizing rate hike expectations.

Today, traders are snared in the contagion-recession loop, trying to balance the global contagion risk from the US recessionary vibes against their overwhelming need to sell dollars.


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With BoJ’s easy stance intact, at least for the next few months, it suggests USDJPY will trade more sensitively to US Bond Yields again. Hence the pair may continue to trade via a “risk on, risk off” bias as it is doing so today.


While China’s mobility data are inflecting positively, there is still possibly too much optimism over China’s demand profile built up in short-term analysts’ expectations, where current market prices are nowhere near reflecting these bullish notes.

Q1 2023 will be a fragile period for commodities, with recession angst filling the airwave. The level of demand matters for oil prices, so if consumers have convinced themselves of recession imminent well, that spring break drive to Florida, or Hawaiian vacation will be shelved, hurting the planes, trains and automobile view for oil markets.

Nevertheless, the observed sharp increase in crude imports to China and the significant decrease in product exports implies Mainland is preparing for a substantial surge in demand, meaning a massive impact on global oil prices could happen in Q1.

Published by Stephen Innes, Managing Partner, SPI ASSET MANAGEMENT