WEBVTT - Chapdelaine's Borthwick Sees USD/JPY at 95 in Next Month(Audio)

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<v Speaker 1>Global business news twenty four hours a day. If Bloomberg

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<v Speaker 1>I'm Charlie Public forty three minutes to go. Ahead of

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<v Speaker 1>the clothes here mixed picture for US equities. Let us

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<v Speaker 1>head right over to the first word breaking news desk

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<v Speaker 1>for today's afternoon call. Here he is Bill Maloney. Good afternoons, Charlie.

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<v Speaker 1>That's right. In the US, averages are trading mix today.

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<v Speaker 1>That Dow currently down forty five point says it Bees

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<v Speaker 1>dropped two and Azack is trading higher by eight. The

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<v Speaker 1>small cap six under games three points, and the US

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<v Speaker 1>ten yield at one point five six percent. Half of

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<v Speaker 1>the S and P sectors are lower, led by lasses

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<v Speaker 1>in telecom, utilities and consumer staples. Materials, industrials and technology

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<v Speaker 1>lead down. Transports outperformed gains seventy one as a biotech

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<v Speaker 1>fall twenty, utilities drop seven, and the VIX is higher

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<v Speaker 1>by one point three percent. Down leaders to the downside,

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<v Speaker 1>including McDonald's, Verizon and free M, while Caterpillar, ut X

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<v Speaker 1>and Boeing led to the upside and dealing new shares

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<v Speaker 1>of analog devices and linear technology are currently halted, and

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<v Speaker 1>alot of devices is said in advanced talks to buy

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<v Speaker 1>linear technology. Following some of your names or the bigger

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<v Speaker 1>names set report after the Belts and I include ACAM, I, Panera, Bread, Twitter, June,

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<v Speaker 1>Ber Networks, US Steel and Apple. Live from the first

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<v Speaker 1>Breaking news desk on Bill Maloney. Charlie, all right, hey,

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<v Speaker 1>thank you very much. We'll be all over Apple and

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<v Speaker 1>Twitter as those numbers break and to hear live breaking

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<v Speaker 1>I'm Charlie Pelton. Dat's some Bloomberg business flash. This is

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<v Speaker 1>taking stock with Kathleen Hayes and Pim Fox on Bloomberg Radio.

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<v Speaker 1>Central Banks and focuses data that the Reserve started it's

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<v Speaker 1>two day policy meeting. No rate hike expected at the

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<v Speaker 1>end of that meeting, however, maybe some signals that they

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<v Speaker 1>could be in the future. Meanwhile, the Bank of Japan

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<v Speaker 1>starts it's to day policy meeting on Thursday. By right,

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<v Speaker 1>it is expected to announce some more stimulus. The question

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<v Speaker 1>now is how much. Meanwhile, the yen surging the most

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<v Speaker 1>is Britain voted to leave the European Unions as traders

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<v Speaker 1>scaled back expectations for further aggressive monetary and physical stimulus

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<v Speaker 1>before UH. They meet later this week at the Bank

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<v Speaker 1>of Japan. Joining US now to put it all together

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<v Speaker 1>for US is Doug worth Quick. He's managing director, head

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<v Speaker 1>of f X Foreign Exchange at Chapter Lane and Co. Doug,

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<v Speaker 1>welcome back, Thank you very much. So first of all,

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<v Speaker 1>you know what's interesting? Um? In an interview, UH did Dan?

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<v Speaker 1>I believe it was Bloomberview contributing Muhammaduarrian was talking about

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<v Speaker 1>how the maybe the markets too complacent about the FED

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<v Speaker 1>raising rates once maybe even twice this year, and he

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<v Speaker 1>also mentioned how he thought that right now that you're

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<v Speaker 1>not going to see the volatility around central banks so

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<v Speaker 1>much in stocks and bonds. The currency market is where

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<v Speaker 1>we're going to be seeing all the big movers. I

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<v Speaker 1>think it's correct there. I think that you're you're seeing

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<v Speaker 1>central banks involved pretty much across the board, and that's

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<v Speaker 1>really pushing down in volatility right now. But the currency

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<v Speaker 1>markets still have a little bit of freedom, is still

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<v Speaker 1>not as much as we'd expect. Doli En certainly is

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<v Speaker 1>trading up and down based upon the expectations for guidance,

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<v Speaker 1>and the Japanese press has certainly been fueling this fire,

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<v Speaker 1>with the NICK saying that fiscal spending would double to

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<v Speaker 1>six trillion yen at the same time overnight. Yet Taro Aso,

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<v Speaker 1>the Finance Minister, coming out and saying regarding fiscal stimulus,

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<v Speaker 1>we've yet to decide on the size of the economic stimulus.

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<v Speaker 1>So the market here's one thing, gets excited, buys doll

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<v Speaker 1>an here's something else, and then sells off again. At

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<v Speaker 1>the same time, as you said, we've bet a b

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<v Speaker 1>o J two day metings starting on Thursday ending on Friday,

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<v Speaker 1>there's a question of whether to expand montrely stimulus. Further,

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<v Speaker 1>I think that that actually maybe unlikely. I think what

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<v Speaker 1>maybe more likely is on Friday we'll find out they

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<v Speaker 1>start talking about forward guidance for the first time, and

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<v Speaker 1>that means maybe talking about maintaining the size of their

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<v Speaker 1>balance sheet going forward, which would give people some comfort,

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<v Speaker 1>and staying long dollar yen at that time being. But

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<v Speaker 1>then again, I think that any sort of position right

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<v Speaker 1>now long dollar yen is sort of like pushing on

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<v Speaker 1>a string. Given I believe there are other actors right

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<v Speaker 1>now that are selling dollars buying end that would include

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<v Speaker 1>central banks like like China, Dog Borthwick. What's long term

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<v Speaker 1>in the mind of a currency trader, but that the

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<v Speaker 1>bands long term normally is you get in the one

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<v Speaker 1>spot and you get a long term once you once

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<v Speaker 1>it goes your way. So if I'm right with Dolly,

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<v Speaker 1>and like the last time I think we had a discussion,

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<v Speaker 1>I said, we go through a hundred. Obviously we dipped

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<v Speaker 1>down past that hundred level after the Brexit. Certainly that

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<v Speaker 1>long term and I've been taking profits around that time.

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<v Speaker 1>I think nowadays, if I have to think long term here,

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<v Speaker 1>and I'm thinking maybe we could go up to one

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<v Speaker 1>ten on some sort of surprise, and at the same time,

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<v Speaker 1>I think it much more likely to go down to

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<v Speaker 1>I'd say that's within the next month or so. Okay.

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<v Speaker 1>The reason I asked that is because I'm wondering whether

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<v Speaker 1>moves in currency markets are leading or lagging indicators for

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<v Speaker 1>investors that may not be in currency markets but are

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<v Speaker 1>in bonds and stocks. Well, I think you can think

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<v Speaker 1>of currency markets as being sort of the tip of

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<v Speaker 1>the spear, and the currency markets when a piece of

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<v Speaker 1>news comes out or we see something hitting the tapes,

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<v Speaker 1>people would trade the currency first because it could be

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<v Speaker 1>that the equity market is closed or the bond market

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<v Speaker 1>is closed, but the currency markets are always open, as

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<v Speaker 1>you know, and so I think that certainly there is

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<v Speaker 1>a little a bit of a leap there in that respect.

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<v Speaker 1>But also people when they buy the currencyre they sell

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<v Speaker 1>the currency. You find that macro investors get on board

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<v Speaker 1>on that before they start thinking about what to do

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<v Speaker 1>with the currency once they bought it or so that's

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<v Speaker 1>a very important question then for the Bank of England

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<v Speaker 1>and uh, you know, to get into the weeds here

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<v Speaker 1>a bit, but it's it's big news today. Bank of

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<v Speaker 1>England policymaker Martin wheel who had been somewhat you know,

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<v Speaker 1>dragging his feet on immediate and big interest rate cuts

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<v Speaker 1>in in the UK, now say he favors immediate stimulus

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<v Speaker 1>for the UK economy. Recent indicators on manufacturing looking much

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<v Speaker 1>worse than he was looking. So you've got the pound

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<v Speaker 1>hit by that, and then weak economic data in the

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<v Speaker 1>US kind of moving the pound in the other direction.

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<v Speaker 1>If it's the pounds a tip of the spear for

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<v Speaker 1>people looking at those UK markets, what's what's the takeaway now.

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<v Speaker 1>I think that the Sterling as soon as that happened.

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<v Speaker 1>I think the most market participants believe that there would

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<v Speaker 1>be a rate cut coming forward. I think there's a

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<v Speaker 1>little bit of a surprise that they didn't cut last month,

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<v Speaker 1>but certainly August fourth that looks like they'll cut from

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<v Speaker 1>zero point five percent to around I think that's certainly

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<v Speaker 1>an expectation. I think that's already priced into Sterling. I

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<v Speaker 1>think if anything, what Sterling has done over the past

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<v Speaker 1>week is or the past couple of weeks since Brexit

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<v Speaker 1>is it's it's it's managed to find a foundation or

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<v Speaker 1>a floor, and people have realized that this isn't going

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<v Speaker 1>to be a full blown Brexit, but it's looking more

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<v Speaker 1>like Brexit light. And I think that with with materials

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<v Speaker 1>Amain there, I think that what you're gonna find out

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<v Speaker 1>is you're gonna find out that she actually starts pushing

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<v Speaker 1>things down in the line. They won't trigger Article fifty

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<v Speaker 1>until the end of the year at least. I think

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<v Speaker 1>before that you're going to find some sort of stabilization

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<v Speaker 1>in Sterling. And maybe I pushed back up to that

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<v Speaker 1>one for two level because people understand that it's not

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<v Speaker 1>going to be quite as catastrophic as everyone was expecting.

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<v Speaker 1>Dog Bothwick, just quickly, dollar Euro currently one oh nine,

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<v Speaker 1>give you about twenty seconds. Well, I think the year

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<v Speaker 1>at all with this one or nine level is still

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<v Speaker 1>very much below it's fair value. I believe that there

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<v Speaker 1>are buyers of the year dollars that are moving their

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<v Speaker 1>reserves into the euro and out of the dollar. I

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<v Speaker 1>think that we're have an expectation to see run one

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<v Speaker 1>fifteen certainly by the end of the year. And even

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<v Speaker 1>though you see the basis moving out in the euro.

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<v Speaker 1>The last time we were at these levels in the

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<v Speaker 1>three year basis wall the euros at one twenty. Thanks

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<v Speaker 1>very much, Douglas Borthwick, Managing director ahead of FX at Chaplin,

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<v Speaker 1>Dame and Company. Right now Euro at one oh nine

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<v Speaker 1>versus the dollar, pounds, sterling one one and the Japanese

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<v Speaker 1>gen trades at one oh four sixty two. This is

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<v Speaker 1>taking Stock. I'm pim Fox my co host Kathleen Hayes.

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