It’s like watching a skydiver with a torn parachute:
It’s sell first and ask questions later. Credit Agricole discusses why. I can’t see how the G20 can do anything much given how riven geopolitics is:
One topic that has featured prominently during recent discussions with clients has been the question about a potential concerted central bank intervention to cheapen the USD and help the EUR, GBP and JPY stabilise. In our view, it is too early to discuss any concerted measures to cheapen the USD similar to the 1985 PlazaAccord for the following reasons. First,the US Treasury remains reluctant to cheapen the USD at a time when imported and domestic US inflation remain the number one problem for US policymakers. Second, in addition, while other G10 central banks were forced to hike rates or intervene in FX markets to stabilise their currencies, they tended to do so in response to aggressive market moves and spikes in FX volatility. At the extreme, this could suggest that the central banks were trying to stabilise FX markets without trying to change the market trends. Lastly, related to that, we further note that the EUR and GBP look quite undervalued relative to their long-term fair values based on purchasing power parity (PPP) but that their current undervaluation pales in comparison to that seen before the Plaza Accord in Q1 1985. Indeed, whereas EUR/USD and GBP/USD are trading-35% and-28% respectively below their PPP values, they were trading as low as-46% and-41% in undervalued territory back in 1985. Looking ahead, FX investors will focus on the meeting of the G20 finance ministers and central bank governors on12 and 13 October that could discuss ‘relaxing’ the conditions under which individual central banks could intervene to defend their currencies against the mighty USD. Even so, we doubt that the G20 meeting could be the venue to discuss a concerted intervention to curb the USD uptrend.
Importantly for the AUD, a strong local economyis failing to help the currency given the RBA remains less hawkish than the Fed and China’s growth remains weak and weighing on commodity prices.
I will add that CNY just smashed through 14 year support like it wasn’t even there and that is not going to cheer equity markets any:
This ain’t helping the mood, either:
Apple Inc. is backing off plans to increase production of its new iPhones this year after an anticipated surge in demand failed to materialize, according to people familiar with the matter.
The Cupertino, California-based electronics maker has told suppliers to pull back from efforts to increase assembly of the iPhone 14 product family by as many as 6 million units in the second half of this year, said the people, asking not to be named as the plans are not public. Instead, the company will aim to produce 90 million handsets for the period, roughly the same level as the prior year and in line with Apple’s original forecast this summer, the people said.
The Fed ordered a recession and it is coming.
