• Equities in Europe trade mostly lower but off worst levels; US equity futures trade on either side of the unchanged mark
• USD/JPY slumped as Japan announced FX market intervention via USD-selling and JPY-buying; DXY retreated from a 111.81 peak as a result
• Debt futures have witnessed some choppy price action at the sidelines, with the longer end of the curve outperforming 
• Russian Deputy Chair of Security Council Medvedev said Russian weapons including nuclear can be used to defend territories in Russia
• Looking ahead, BoE, CBRT & SARB Policy Announcements, Speeches from BoE's Haskel, Tenreyro & ECB's Schnabel

22nd September 2022

LOOKING AHEAD

• BoE, CBRT & SARB Policy Announcements, Speeches from BoE's Haskel, Tenreyro & ECB's Schnabel
• Click here for the Week Ahead preview.

CENTRAL BANKS

BOJ/OFFICIALS

• Japanese Government and BoJ intervened in FX markets, according to the Japanese Vice Finance Minister - the government and the BoJ stepped into the market to buy JPY for USD.
• Japan Finance Minister Suzuki is concerned about excessive FX moves, that cannot be overlooked; will continue to closely watch FX markets, will take necessary steps against excessive moves; did not comment on size of intervention.
• BoJ kept its monetary policy unchanged, as expected, with rates at -0.10% and QQE with yield curve control maintained to target the 10yr JGB yield at around 0% through a unanimous decision. BoJ left its forward guidance unchanged in which it expects short- and long-term rates to remain at present or lower levels and maintained guidance on policy bias that it will take additional easing steps without hesitation as needed with an eye on the pandemic's impact on the economy, while it extended the pandemic relief program.
• BoJ Governor Kuroda does not see the need to change forward guidance for about 2-3 years. Kuroda said will patiently continue powerful easing, will not hesitate to ease policy further if needed; closely watching financial and FX moves**. JPY weakening is one-sided, nots there are speculative moves behind weakening JPY. Click here for full details.

SNB

• SNB hikes its Policy Rate by 75bps to 0.5% as expected; willing to be active in FX market as necessary; further rate hikes cannot be ruled out; no CHF classification in release. Click here for full details.
• SNB Chair Jordan says SNB ready to intervene to prevent excessive weakening or strengthening of the CHF; recent appreciation has helped dampen inflation. If there were to be an excessive appreciation of the Swiss franc, we would purchase foreign currency. If the Swiss franc were to weaken, however, we would consider selling foreign currency. Click here for full details.
• SNB Chair Jordan reiterates that the SNB can do interim rate decisions if needed.

NORGES

• Norges hikes its Key Policy Rate by 50bps as expected to 2.25%; policy rate will most likely be raised further in November; This may suggest a more gradual approach to policy rate setting ahead. Click here for full details.
• Norges Bank Governor Bache says the central bank is likely to hike by 25bps in November.

ECB

• ECB's Schnabel says we must increase interest rates further, "I assume that the ECB Governing Council will hike interest rates further at its next meeting. At the moment, I cannot say how large this interest rate hike will be and up to what level we will". In the short-term inflation could increase further, despite rate hikes. We do not currently see any indications of a wage-price spiral; wage growth has increased, but is still moderate, via t-online.
• ECB spokesperson says the central bank did not intervene in FX markets, via Reuters

OTHER

• Riksbank's Ohlsson says we do not have a target for the SEK.
• China's PBoC says it will further improve macroprudential policy framework
• PBoC set USD/CNY mid-point at 6.9798 vs exp. 6.9946 (prev. 6.9536).
• Brazil Central Bank maintained the Selic Rate at 13.75% as expected via unanimous decision, while it will assess if the prospect of holding the Selic Rate long enough will ensure inflation convergence and stated that future policy steps could be adjusted. Furthermore, it will remain vigilant and will not hesitate to resume the cycle of rate adjustments if disinflation does not happen as expected.
• Hong Kong Monetary Authority raised the base rate by 75bps to 3.50%, as expected.
• Bank of Taiwan, Bank of Indonesia, and Bank of Philippines all raised rates in-line with expectations.

GEOPOLITICS

RUSSIA-UKRAINE

• Russian Deputy Chair of Security Council Medvedev says Russian weapons including nuclear can be used to defend territories in Russia, via Reuters.
• Ukrainian President Zelensky laid out five conditions for peace with Russia and said that they are non-negotiable, while conditions included punishment for Russian aggression, restoration of Ukraine's security and territorial integrity, as well as security guarantees. Zelensky also stated that Ukrainian neutrality is out of the question and he ruled out that a settlement can happen on a different basis than the Ukrainian peace formula, according to Reuters.

OTHER

• The Iraqi Foreign Minister says "There is a discussion that the next session between Riyadh and Tehran will be at a level other than foreign ministers", via Al Jazeera.
• Iranian Chief of Staff says "We will conduct a naval exercise in the Northern Ocean with Russia, China, and possibly Pakistan, Oman and other countries", according to Al Jazeera

EUROPEAN TRADE

EQUITIES

• Equities in Europe trade mostly lower but off worst levels after an initial downbeat open following the fallout from the FOMC.
• Sectors are mostly negative but do not portray as much of a defensive bias as they did at the cash open, but banks outperform.
• US equity futures have been similarly clambering off lows into positive territory with little in the way of drivers to explain the trimming of losses
• Click here for more detail.

FX

• USD/JPY slumped as Japan announced FX market intervention via USD-selling and JPY-buying.
• DXY initially extended on gains to a current peak of 111.81 before recoiling as Japan intervened to stem the sliding JPY
• CHF buckles after markets were disappointed by the 75bps SNB hike as market expectations skewed towards 100bps.
• Other G10s are all off worst levels vs the Greenback.
• Click here for more detail.
• Click here for OpEx for the NY Cut.

FIXED INCOME

• Debt futures have witnessed some choppy price action at the sidelines, with the longer end of the curve outperforming on spread positioning and perhaps some relief buying.
• Bunds topped out at 142.02 vs 140.58 at the other end of the scale having closed at 141.20 on Wednesday, Gilts at 104.28 from a 103.40 low.
• T-note is midway between 114-00/113-18+ overnight extremes.
• Click here for more detail.

COMMODITIES

• WTI and Brent front-month futures have been climbing as a result of the pullback in the Dollar which was triggered by Japan intervening in the FX market.
• Spot gold also moved on the aforementioned Dollar action – with the yellow metal rising from a USD 1,655/oz intraday base towards closer to its 10 DMA (USD 1,685.87/oz).
• Base metals, a similar story, LME copper feels a boost from the Buck but fails to hold into gains north of USD 7,750/t.
• US Senator Manchin released the energy permitting bill to speed up energy projects which is expected to be included in the funding bill and his staff said the bill had the votes to pass the Senate, according to Reuters.
• Click here for more detail.

CRYPTO

• Bitcoin reclaimed the USD 19,000 level as the Dollar eased, whilst Ethereum extends gains towards 1,300.

NOTABLE EUROPEAN HEADLINES

• UK PM Truss wants to resolve the Northern Ireland Protocol dispute by the 25th anniversary of the Good Friday Agreement, according to FT.

APAC TRADE

• APAC stocks were mostly negative in the aftermath of the FOMC where the Fed hiked rates by 75bps and raised their dot plot projections, with the terminal rate forecast increased to 4.6% from 3.8%
• ASX 200 was closed today due to the National Day of Mourning for the Queen.
• Nikkei 225 briefly fell below 27,000 although bounced off its lows as the BoJ stuck to its dovish policy.
• Hang Seng and Shanghai Comp were pressured with notable losses in casino stocks and underperformance in the tech sector amid the higher rate environment as the HKMA also raised rates by 75bps in lockstep with the Fed.

NOTABLE APAC HEADLINES

• US Senators asked for a review of Apple's (AAPL) plan to use Chinese chips, according to Washington Post.
• Japanese PM Kishida said they will further ease border restrictions from October, according to TBS.
• Hong Kong Gov't expects, next week, to announce the removal of COVID hotel quarantine policy for overseas arrivals, via HKO1 citing sources.

NOTABLE APAC DATA

• New Zealand Trade Balance (Aug) -2447M (Prev. -1092.0M, Rev. -1406M)
• New Zealand Exports (Aug) 5.48B (Prev. 6.68B, Rev. 6.35B); Imports (Aug) 7.93B (Prev. 7.77B, Rev. 7.76B)