Markets are taking a bit of a defensive posture ahead of US earnings and possibly due to the rosier economic picture that does point to some risk that central banks may be forced to keep growth below potential via further policy tightening if more resilient growth prompts inflation or commodity prices do surprise to the upsi­­­de significantly.


With China data turning the corner in Q4, oil prices should start to trend higher. Still, given the uniquely volatile nature of oil prices, macro-economic and financial market crosswinds will likely keep traders bobbing and weaving as the market debate hard vs soft vs any landing.



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A little too far, too fast.

Although the beats on the Chinese activity data were generally perceived as positive, the data did not trigger any follow-through buying of the renminbi or Asian currencies. Rather than the start of the end, this interlude is likely a pre-Lunar New Year “profit-taking pause” ultimately, when Chinese consumers start spending their three years’ worth of Covid savings, it will provide a spectacular growth boost to the Yuan, pro-cyclical currencies like the Euro, and commodity currencies. It will also mark another positive development for the European growth outlook.


Most expect YCC to remain in place with potentially greater flexibility introduced. Still, after the surprise move last month and reports of a plan to review the side effects of YCC at this meeting, the risk of abandoning it seems unlikely, especially with Tokyo Yen flows providing little tell.

If the BoJ decides to proceed with a second consecutive tweak to the current policy, even if still characterized as a technical adjustment, the market would likely press more aggressively against YCC and prepare for a nearer-term exit, so the street should remain locked into bullish JPY trades.

Originally published by Stephen Innes, Managing Partner, SPI ASSET MANAGEMENT