WEBVTT - Asia Markets React to Central Banks 0:00:02.480 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio news. 0:00:09.600 --> 0:00:13.320 This is the Bloomberg Daybreak Asia podcast. I'm Brian Curtis 0:00:13.400 --> 0:00:16.119 along with Doug Krisner join us each day for the 0:00:16.160 --> 0:00:19.520 stories making news and moving markets in the Asia Pacific. 0:00:19.760 --> 0:00:22.200 You can subscribe to the show anywhere you get your 0:00:22.200 --> 0:00:26.160 podcasts and always on Bloomberg Radio, the Bloomberg Terminal, and 0:00:26.200 --> 0:00:30.920 the Bloomberg Business App. Joining us now for some discussion 0:00:30.960 --> 0:00:34.880 about the FED and inflation and the markets is mister 0:00:35.000 --> 0:00:39.320 Steve Sosnik, chief strategist at Interactive Brokers. Steve, great to 0:00:39.320 --> 0:00:41.000 have you in the program, and thanks for doing this 0:00:41.080 --> 0:00:43.640 on a Sunday. We do appreciate it. I want to 0:00:43.640 --> 0:00:45.080 talk to you a little bit about the FED. The 0:00:45.159 --> 0:00:48.879 stance that we heard from Jerome Powell. It seems to 0:00:48.920 --> 0:00:53.880 be part opium, part rational analysis. It's to be fair, 0:00:54.280 --> 0:00:58.400 and maybe just part patients. I'm curious your take on 0:00:58.840 --> 0:01:02.680 where we are now in the ballot between inflation and jobs. 0:01:03.600 --> 0:01:05.600 Well, first of all, good morning, Brian, and sorry to 0:01:05.640 --> 0:01:10.360 hear you were at a sweaty weekend. The there's definitely 0:01:10.800 --> 0:01:13.520 there is definitely that hopium element in this whole thing. 0:01:14.480 --> 0:01:17.039 You know, uh, you know, you have Larry Summers on 0:01:17.640 --> 0:01:21.479 Bloomberg TV, you know, on Friday night our time, basically, 0:01:21.640 --> 0:01:24.720 you know, saying that he doesn't understand where where the 0:01:24.720 --> 0:01:27.800 FED thinks that the neutral rate is. And I really 0:01:28.560 --> 0:01:30.720 I didn't express it quite so eloquently, but I've been 0:01:30.800 --> 0:01:32.600 I've been getting at the same point in some of 0:01:32.600 --> 0:01:35.240 the work I've been doing, which is, you know, we've 0:01:35.280 --> 0:01:39.319 got all this fiscal expansion. You know, you look at 0:01:39.400 --> 0:01:42.160 you look at rollicking stock markets, you look at bond 0:01:42.200 --> 0:01:46.240 markets doing fine, still pricing in big cuts. You look 0:01:46.240 --> 0:01:49.240 at heavy speculation and things like bitcoin and gold and 0:01:49.280 --> 0:01:53.360 other things that are non interest bearing assets, and you 0:01:53.440 --> 0:01:55.920 have to wonder, why do we actually need interest rate cuts, 0:01:56.000 --> 0:01:59.440 especially if the if the summary of economic projections is 0:01:59.520 --> 0:02:02.240 now up two point one percent, which tells me a 0:02:02.240 --> 0:02:06.680 recession isn't in the cards either. So yes, there's rational analysis, 0:02:06.720 --> 0:02:09.600 but I do have to think that that you know, 0:02:09.680 --> 0:02:12.519 he's feeding into this idea of this urgency that we 0:02:12.600 --> 0:02:15.080 need to get to a more neutral rate without willingess 0:02:15.160 --> 0:02:16.240 what that neutral rate is. 0:02:16.720 --> 0:02:18.720 Yeah, back to Larry Summer, is the one issue I 0:02:18.760 --> 0:02:21.040 would take with his comments is, you know, he's saying, 0:02:21.240 --> 0:02:24.000 why is the Fed in such a hurry. And actually 0:02:24.200 --> 0:02:27.360 the Fed did not say they were definitely going to 0:02:27.400 --> 0:02:30.320 start cutting rates by the summer. They said that they 0:02:30.320 --> 0:02:32.440 were watching the data and that they thought that the 0:02:32.480 --> 0:02:34.960 two months January and February. 0:02:35.320 --> 0:02:38.200 Were a couple of months. That's it, a couple of months. 0:02:38.240 --> 0:02:42.120 Just like they didn't overreact last year when disinflation was 0:02:42.160 --> 0:02:45.080 happening over a period of seven months. They still, you know, 0:02:45.080 --> 0:02:47.799 they still hung in there with their rate hikes and said, well, 0:02:47.840 --> 0:02:51.160 we'll see. That's still what they're saying, right, we'll see. 0:02:51.360 --> 0:02:54.120 So that's why I think the patience comes in. And 0:02:55.160 --> 0:02:58.560 should we doubt his word that if the inflation stays 0:02:58.600 --> 0:03:01.840 hot that they'll wait longer, or that they could even hike. 0:03:03.000 --> 0:03:05.919 I don't doubt his word. I'm not going to say 0:03:05.919 --> 0:03:08.800 that about Chairman Powell. But the thing I don't think 0:03:08.840 --> 0:03:13.600 he appreciates is if he says, maybe the market here's yes, okay, 0:03:13.600 --> 0:03:16.880 And that's I think really where it really stems from. 0:03:17.080 --> 0:03:20.280 Think about the reaction to the December meeting. He confirmed 0:03:20.280 --> 0:03:22.320 that we would that we you know, three rate cuts 0:03:22.320 --> 0:03:24.760 would be in the cards potentially for twenty twenty four. 0:03:24.960 --> 0:03:28.280 The market heard six, and you know, so this is 0:03:28.320 --> 0:03:31.600 I think what he doesn't necessarily reckon with when he 0:03:31.639 --> 0:03:33.960 speaks publicly. Or maybe this is what he wants because 0:03:33.960 --> 0:03:37.320 it just keeps confidence high and maybe actually reduces the 0:03:37.360 --> 0:03:39.360 need for the FED to do anything. Maybe. 0:03:39.400 --> 0:03:42.600 Yeah, I think that's where you got a point from. Yeah, 0:03:42.640 --> 0:03:45.920 you definitely got a point there. And well there's this too. 0:03:46.320 --> 0:03:48.960 I'm curious whether the FED and even the Biden administration 0:03:49.520 --> 0:03:51.680 should be getting a little bit worried about the oil 0:03:51.760 --> 0:03:55.000 price here. It has been creeping higher. We heard from 0:03:55.120 --> 0:03:59.520 the IEA about ten days ago they increased their demand 0:03:59.560 --> 0:04:04.240 for cap and they reduced their supply forecast. And you 0:04:04.280 --> 0:04:06.240 know that could become an issue too, right. 0:04:06.920 --> 0:04:09.960 Oh, absolutely, you know that that when when I I've 0:04:10.000 --> 0:04:12.400 tracked this several times where where I look at the 0:04:12.920 --> 0:04:16.520 consumer you know, expectations for consumer expectations for one year 0:04:16.560 --> 0:04:20.359 on one year inflation, it pretty much tracks the price 0:04:20.400 --> 0:04:23.400 of gasoline at the pump. Yeah, you know, almost perfectly. 0:04:23.720 --> 0:04:25.760 And so yes, that's the problem. If prices at the 0:04:25.760 --> 0:04:28.800 pump go back up, that's not good for the Biden administration. 0:04:28.960 --> 0:04:33.120 And a strong economy lists gas prices because there's more 0:04:33.160 --> 0:04:35.520 demand for energy. 0:04:35.560 --> 0:04:38.200 We we do have a story on the terminal that 0:04:38.720 --> 0:04:41.640 suggests that investors are back to putting on trades now 0:04:41.680 --> 0:04:44.520 that will benefit from a cutting interest rates, and not 0:04:44.600 --> 0:04:47.760 just citing the FED, but also the ECB and. 0:04:47.680 --> 0:04:50.000 The Bank of England and others too. 0:04:50.839 --> 0:04:53.719 How are you positioning for, you know, the sort of 0:04:53.760 --> 0:04:55.080 play over the next few months. 0:04:55.800 --> 0:04:58.160 Well, one of the things that I'm that I've been 0:04:58.200 --> 0:05:01.200 referring to because I've seen this trade to a large extent, 0:05:01.440 --> 0:05:04.400 and I call it fomo insurance. What we see in 0:05:04.400 --> 0:05:08.839 the options market is definitely options priced in pricing in 0:05:10.440 --> 0:05:13.279 it works more aggressively purchased to the buyside than to 0:05:13.320 --> 0:05:16.320 the downside. And yes there's a lot of speculation and options, 0:05:16.360 --> 0:05:19.800 but still the options market is the best place for 0:05:19.839 --> 0:05:23.560 institutions to put on hedges put on hedges, except the 0:05:23.600 --> 0:05:26.240 thing that they're hedging is they're fomo. They don't want 0:05:26.279 --> 0:05:29.120 to miss a rally. So if you've got Nvidia adder 0:05:29.200 --> 0:05:31.800 near aal time highs, or pick your product added near 0:05:31.839 --> 0:05:34.560 all time highs, you may not want to be putting 0:05:34.560 --> 0:05:36.599 a lot of putting a lot of capital into it, 0:05:36.640 --> 0:05:39.120 but you may want that upside. And we're seeing a 0:05:39.160 --> 0:05:43.240 lot of traders and investors basically buying the upside so 0:05:43.279 --> 0:05:45.360 that they don't have to put a lot of money 0:05:45.360 --> 0:05:48.279 into products that are added near all time hids but 0:05:48.320 --> 0:05:50.880 are performing so well that you really can't afford to 0:05:50.880 --> 0:05:51.280 miss it. 0:05:52.080 --> 0:05:53.840 We've got some time to circle back, but I want 0:05:53.839 --> 0:05:56.200 to get a question in on Japan and China and 0:05:56.240 --> 0:05:57.960 then if we if we have some time, we'll come 0:05:58.000 --> 0:06:01.880 back to the general thrust of things on investing in Japan. 0:06:03.160 --> 0:06:05.440 Chris Wood's a guy that I have read for twenty 0:06:05.440 --> 0:06:09.160 odd years. Jeffries used to be at CLSA, and he 0:06:09.520 --> 0:06:11.760 spent some time in a peace out late last week 0:06:11.800 --> 0:06:15.559 talking about how all of a sudden you're seeing interest 0:06:15.640 --> 0:06:19.359 from domestic Japanese investors in their own stock market and 0:06:19.839 --> 0:06:24.200 they've been net sellers for like twenty years. And you know, 0:06:24.400 --> 0:06:26.320 I ask you the question now because the ni Ka 0:06:26.360 --> 0:06:28.680 has rallied a lot and people are wondering, well, you know, 0:06:28.720 --> 0:06:30.440 I don't know, is it has gone too far? 0:06:30.839 --> 0:06:32.200 Your thoughts on Japan. 0:06:32.839 --> 0:06:35.880 Well, I think what what you're discussing seeing in Japan 0:06:36.040 --> 0:06:39.080 is human nature as it refers to the stock market 0:06:39.080 --> 0:06:42.680 at work. I mean, you know, supply and demand has 0:06:42.680 --> 0:06:44.960 a different as an upside down curve. It's the only 0:06:45.080 --> 0:06:47.080 it's really pretty much the only thing I can think 0:06:47.120 --> 0:06:50.440 of where the demand goes up as the price goes up. 0:06:50.680 --> 0:06:53.440 It's completely the opposite of what we learn in economics 0:06:53.440 --> 0:06:56.359 one oh one. And I think, you know, after twenty 0:06:56.800 --> 0:06:59.400 years of being beaten down by the stock market and 0:06:59.400 --> 0:07:02.520 it's lack of performance, I think it's quite encouraging to 0:07:02.520 --> 0:07:06.200 see Japanese investors looking at their domestic markets, although it 0:07:06.240 --> 0:07:08.040 probably would have been nicer if they've been looking at 0:07:08.040 --> 0:07:11.120 twenty thousand and starting to look at forty thousand. The 0:07:11.160 --> 0:07:13.680 other piece of anecdotal evidence i'd heard, and I can't 0:07:13.680 --> 0:07:15.000 put a number on it, but I think it was 0:07:15.120 --> 0:07:19.880 Eric Belchunas who reported that the Japanese government, thanks to 0:07:19.920 --> 0:07:24.280 all their quantitative easing, owns about seventy percent of the 0:07:24.280 --> 0:07:28.360 ETFs in Japan. And that's going to be interesting because 0:07:28.400 --> 0:07:30.640 at some point you'd like to think that the Bank 0:07:30.680 --> 0:07:32.640 of Japan would sort of take the profits on this 0:07:33.440 --> 0:07:36.040 and release those back into the market. Does that put 0:07:36.080 --> 0:07:37.760 a ceiling on things or do they let things get 0:07:37.800 --> 0:07:41.880 a little euphoric If that institution is that international and 0:07:41.920 --> 0:07:43.400 domestic investors coming back. 0:07:43.280 --> 0:07:45.800 In Okay, now a place that hasn't gone up and 0:07:45.840 --> 0:07:48.840 we can't talk about the greater fool theory is China. 0:07:49.040 --> 0:07:51.360 And we had the premier Lee Chong opening up this 0:07:51.480 --> 0:07:55.200 key Development forum. A lot of big time CEOs there, 0:07:55.240 --> 0:07:59.360 including mister Cook at Tim Cook at Apple, but his 0:07:59.440 --> 0:08:02.679 basic mess is to play down the concerns the Chinese 0:08:02.720 --> 0:08:04.960 economy is okay, how are you playing that? 0:08:06.320 --> 0:08:08.480 You know, I'm not one of the people who believes 0:08:08.480 --> 0:08:11.760 that China, you know, Greater China's uninvestable, but it's certainly 0:08:11.960 --> 0:08:14.840 you know, since the world is in love with momentum 0:08:14.840 --> 0:08:20.280 trading right now and momentum investing, you know, China's basically zagging. 0:08:20.320 --> 0:08:23.800 Well the rest of the world zigs moving sideways. You know. 0:08:23.920 --> 0:08:25.640 On the one hand, I guess if you believe in 0:08:25.680 --> 0:08:29.720 international diversification, you're diversifying if you invest in Greater China. 0:08:30.080 --> 0:08:32.440 The problem is, it's really the one set of you know, 0:08:32.480 --> 0:08:34.920 Hong Kong and Mainland of pretty much the one set 0:08:34.920 --> 0:08:37.920 of markets that are not at her near all time highs. 0:08:38.760 --> 0:08:40.960 And so you know, if you're a value player, yeah, 0:08:40.960 --> 0:08:42.040 there's definitely. 0:08:41.679 --> 0:08:44.560 Good time, right, there's some possibility. Okay, Steve, thank you 0:08:44.679 --> 0:08:47.080 very much. Got a homebrew coming away one. 0:08:47.000 --> 0:08:47.600 Of these days. 0:08:48.240 --> 0:09:11.720 Steve Sosnik from Interactive Brokers take a closer look at 0:09:11.720 --> 0:09:14.360 the FED and interest rates and the US economy with 0:09:14.520 --> 0:09:20.079 Mark Heppenstall, President and CIO of Pen Mutual Asset Management. Mark, 0:09:20.400 --> 0:09:22.640 is it safe to say that the FED is well 0:09:22.679 --> 0:09:26.679 into now starting to think about jobs more and a 0:09:26.760 --> 0:09:29.480 little bit less about inflation And how do you think 0:09:29.559 --> 0:09:30.840 the balance is at the moment? 0:09:32.360 --> 0:09:35.320 Well, Brian, good to be with you this evening. 0:09:36.160 --> 0:09:39.920 I do think that last week's FED meeting where FED 0:09:40.040 --> 0:09:43.720 Chair Pale I don't want to say he necessarily dismissed 0:09:44.360 --> 0:09:48.719 the recent uptick in inflation, but I will say it 0:09:48.800 --> 0:09:52.840 is hard to reconcile. I guess three rate cuts this 0:09:52.920 --> 0:09:55.960 year in light of the projection that the FED made 0:09:56.040 --> 0:09:58.320 last week that inflation wasn't going to hit their two 0:09:58.360 --> 0:10:02.600 percent target until two twenty six. So, you know, there's 0:10:02.640 --> 0:10:06.080 been a lot of talk about whether the inflation target 0:10:06.160 --> 0:10:08.959 may in fact be more of a range now as 0:10:08.960 --> 0:10:13.280 opposed to a precise target at two percent. But I 0:10:13.320 --> 0:10:15.959 do think that, you know, last year, they seem to 0:10:16.000 --> 0:10:19.000 be willing to sort of accept the fact that there 0:10:19.080 --> 0:10:21.480 was going to be some pain necessary in the labor market, 0:10:21.520 --> 0:10:23.600 and thankfully that has not at all been the case 0:10:23.640 --> 0:10:26.720 with more than five hundred basis points of interest rate hikes. 0:10:27.720 --> 0:10:29.800 But I do think that I would say that sort 0:10:29.800 --> 0:10:33.600 of dynamic between inflation and employment in the dual mandate 0:10:33.720 --> 0:10:36.960 is much more in balance than it was, let's say, 0:10:36.960 --> 0:10:38.040 at this point last year. 0:10:39.160 --> 0:10:43.160 Well, we had seven months last year of disinflation, pretty 0:10:43.200 --> 0:10:46.559 strong disinflation. We had rates coming or actually inflation coming 0:10:46.559 --> 0:10:49.320 down pretty solidly. It wasn't at the target, not even 0:10:49.400 --> 0:10:51.840 near it, but it did come down a lot. But 0:10:51.960 --> 0:10:54.200 I'm curious why so many people now think that the 0:10:54.280 --> 0:10:58.280 two months that we've seen here, even given seasonal you know, 0:10:58.400 --> 0:11:02.200 seasonal changes and everything, bad weather in January, why are 0:11:02.240 --> 0:11:05.440 those two months like swinging everybody on what the trend is. 0:11:07.360 --> 0:11:11.240 Well, that is that is a good point, because you know, 0:11:11.280 --> 0:11:14.880 we've obviously come down a long way, depending on which 0:11:15.520 --> 0:11:18.680 one of the inflation metrics that you want to use, 0:11:18.760 --> 0:11:22.400 but clearly we've made a lot of progress getting back 0:11:22.440 --> 0:11:26.000 closer to the FEDS two percent target. And I do think, 0:11:26.080 --> 0:11:29.240 especially as you mentioned that, you know, the seasonal in 0:11:29.360 --> 0:11:32.240 January tends to be I would say, maybe distorted a 0:11:32.240 --> 0:11:33.480 bit to the high side. I think it was two 0:11:33.559 --> 0:11:35.880 years in a row where January was somewhat of an outlier. 0:11:37.080 --> 0:11:39.679 But it does seem as though, you know, the employment 0:11:40.080 --> 0:11:42.920 picture is still somewhat out of balance, where there aren't 0:11:43.000 --> 0:11:48.120 enough unemployed workers to fill all the open positions. Some 0:11:48.200 --> 0:11:52.840 of the service sector inflation appears to be moving higher 0:11:53.360 --> 0:11:55.720 if you look at the wealth effect with what's happening 0:11:55.840 --> 0:11:59.679 within the stock market, it does seem as though even 0:12:00.559 --> 0:12:03.880 residential real estate, it seems as though buyers are now 0:12:04.200 --> 0:12:08.160 a little more willing to accept seven percent mortgage rates 0:12:08.200 --> 0:12:10.719 than maybe some of the sticker shock they had last year. 0:12:10.800 --> 0:12:12.560 So I just think there are a lot of factors 0:12:12.600 --> 0:12:15.520 that could keep inflation above the two percent target. 0:12:15.640 --> 0:12:17.400 Surely there's so much that we don't know. 0:12:18.040 --> 0:12:21.920 Patients may be their key position here at the moment. 0:12:22.480 --> 0:12:24.880 They do have the math working in their favor, and 0:12:24.880 --> 0:12:27.959 it's working in the favor of the American worker as well, 0:12:28.000 --> 0:12:31.600 because inflation levels are well below the Fed funds rate 0:12:31.640 --> 0:12:34.080 at the moment, and the longer they wait, the more 0:12:34.200 --> 0:12:36.400 the lag effect comes into effect. 0:12:36.480 --> 0:12:38.520 Right, Yeah, I. 0:12:38.520 --> 0:12:42.840 Mean that is very true. And I was listening to 0:12:42.880 --> 0:12:46.760 an interview earlier this evening on Bloomberg with Larry Summers, 0:12:47.360 --> 0:12:51.199 and he was really calling into question the neutral rate 0:12:51.240 --> 0:12:54.200 projection by the Federal Reserve and the fact that they 0:12:54.280 --> 0:12:56.800 kept it basically at near two and a half percent 0:12:56.880 --> 0:13:00.880 with last weeks dat plots and his estimate that it's 0:13:00.880 --> 0:13:03.959 somewhere above the four percent level today. So really it's 0:13:04.160 --> 0:13:08.880 it's just a question of how restrictive the Federal Reserve 0:13:09.080 --> 0:13:10.320 is today relative to. 0:13:10.720 --> 0:13:12.400 The neutral rate of interest. And I think there are 0:13:12.400 --> 0:13:13.520 a lot of secular. 0:13:13.120 --> 0:13:16.120 Forces that are that are at play here. 0:13:16.160 --> 0:13:17.520 So again, I think even if. 0:13:17.440 --> 0:13:20.360 He's right, even if he's right, and you know, that's 0:13:20.480 --> 0:13:22.640 pretty high four percent, I think the Fed's at two 0:13:22.640 --> 0:13:26.240 point six up from two point five. Even if he's right, 0:13:26.280 --> 0:13:28.680 the math is still working in your favor. Right, FED 0:13:28.720 --> 0:13:32.120 runs rate is five point thirty seven and a half, and. 0:13:32.040 --> 0:13:35.319 So you know, it's it's going to be it's going to. 0:13:35.280 --> 0:13:39.240 Be a sort of tightening measure that stays in place 0:13:39.320 --> 0:13:41.120 as long as they don't actually start cutting. 0:13:42.200 --> 0:13:44.520 Well, that is very very true. 0:13:45.280 --> 0:13:47.400 However, if you sort of look at where the ten 0:13:47.480 --> 0:13:51.480 yere treasury is today, for example, that that's awfully close 0:13:51.559 --> 0:13:54.040 to a four percent neutral rate. 0:13:54.080 --> 0:13:55.199 If that is indeed the target. 0:13:55.320 --> 0:13:57.480 So, you know, I think the slope of the yield 0:13:57.520 --> 0:14:02.520 curve is you know, clearly making longer term borrowing costs 0:14:02.559 --> 0:14:05.199 a lot lower. And if you just look at how 0:14:05.520 --> 0:14:09.360 easy credit conditions are today by certain metrics, and we 0:14:09.360 --> 0:14:12.640 spend a lot of time investing in the corporate bond market, 0:14:12.679 --> 0:14:15.600 you know, investment grade and high yield spreads are really 0:14:15.679 --> 0:14:18.079 near the lowest levels since the financial crisis. So again, 0:14:18.320 --> 0:14:20.320 there are a lot of signals today that says that 0:14:20.520 --> 0:14:25.160 sort of this fed forward guidance, this communication that's tilted 0:14:25.200 --> 0:14:27.080 clearly towards easier. 0:14:26.720 --> 0:14:29.920 Money, has in fact already ease credit by s. 0:14:30.200 --> 0:14:32.760 Do you feel pretty comfortable with Do you feel pretty 0:14:32.760 --> 0:14:38.880 comfortable collecting those seven percent or so yields on corporates? 0:14:39.600 --> 0:14:43.320 Well, I will say we you know, I think if 0:14:43.360 --> 0:14:46.560 you look at the absolute yield levels today, we think 0:14:46.720 --> 0:14:49.320 they look attractive, even if you think that let's say, 0:14:49.320 --> 0:14:52.560 inflation sort of stays in that three to four percent range. 0:14:52.560 --> 0:14:55.040 So I think there are a lot of attractive opportunities 0:14:55.080 --> 0:14:56.560 in the corporate bond world today. 0:14:56.600 --> 0:14:59.560 Yes, Mark, thank you. Unfortunately tied on time. Mark Hepenstall, 0:14:59.640 --> 0:15:24.720 President CIO of pen Mutual Asset Management, Let's get to 0:15:24.760 --> 0:15:28.000 our guest, Maja Bean Zaman, who is head of FX 0:15:28.000 --> 0:15:31.280 research shit A and Z. Maja Bean, thanks very much 0:15:31.280 --> 0:15:33.840 for joining us. Let's talk first about the Bank of Japan. 0:15:34.360 --> 0:15:38.640 It seems like what they did it didn't quite work 0:15:38.680 --> 0:15:41.920 out because we've seen weakness in the Japanese yet, and 0:15:41.960 --> 0:15:44.240 I mean, perhaps we can argue that it did work 0:15:44.280 --> 0:15:47.440 out and they sort of threaded the needle there. But 0:15:47.520 --> 0:15:49.800 then this morning you had the top currency official in 0:15:49.920 --> 0:15:53.840 Japan warning against speculation, saying that the action that we've 0:15:53.880 --> 0:15:57.479 seen here with yen is not in line with the fundamentals. 0:15:58.240 --> 0:16:00.320 How do you see the yen moving against the dollar, 0:16:00.400 --> 0:16:02.200 for instance, over the medium term. 0:16:04.680 --> 0:16:06.720 Look, I think over the medium time we do see 0:16:06.760 --> 0:16:08.480 a little bit of strengthening in the end, but in 0:16:08.520 --> 0:16:12.080 the short term, surely we think it will remain elevate. Dollar. 0:16:12.240 --> 0:16:15.040 En will remain elevated above that one fifty marks we 0:16:15.080 --> 0:16:18.560 have seen previously. You know, over the past year, even 0:16:18.680 --> 0:16:22.080 verbal intervention usually doesn't have much much of an effect. 0:16:22.080 --> 0:16:24.280 And at the end of the day, it's really those 0:16:24.360 --> 0:16:27.560 you know, dollar and rate differentials that are the key 0:16:27.640 --> 0:16:30.520 driving factor of this currency pair. And we have seen 0:16:30.560 --> 0:16:34.320 the dollar stronger over the last week, and that'speeding into 0:16:34.320 --> 0:16:34.760 dolly en. 0:16:35.680 --> 0:16:37.840 One of the issues seems to be that a lot 0:16:37.880 --> 0:16:42.080 of central banks elsewhere around the world looking to cut 0:16:42.120 --> 0:16:44.200 their rates at the same time that the FED may 0:16:44.200 --> 0:16:46.960 be cutting its rates. And so, you know, the strength 0:16:46.960 --> 0:16:48.880 that we saw on the dollar that we thought might 0:16:49.360 --> 0:16:52.320 turn into weakness with the FED cutting now seems like 0:16:52.440 --> 0:16:56.320 it's actually keeping the dollar strong, and so it's hard 0:16:56.320 --> 0:16:59.000 for the end to really rally against the dollar. Is 0:16:59.640 --> 0:17:01.880 you know, We've got a lot of variables there, but 0:17:02.480 --> 0:17:04.719 do you see that that other central banks and the 0:17:04.720 --> 0:17:07.120 FED moving and sync keeps strength in the green back. 0:17:08.600 --> 0:17:10.600 Look, I think in the short term, especially over the 0:17:10.640 --> 0:17:13.120 last few weeks, as you said, everybody's looking to cut, 0:17:13.200 --> 0:17:14.960 it's going to be the race to who cuts first 0:17:14.960 --> 0:17:17.480 and who cuts last, and possibly that's probably going to 0:17:17.480 --> 0:17:20.400 have some impact on the way the dollar moves. Of course, 0:17:20.480 --> 0:17:22.720 last week we had the SMB surprise. I think we 0:17:22.760 --> 0:17:25.560 had a little bit of that driving that dollar strength. 0:17:25.640 --> 0:17:29.600 We also had BOE now looking to sort of turn 0:17:30.119 --> 0:17:33.879 a little bit neutral. You could argue RBA similar language. 0:17:33.960 --> 0:17:35.680 I think all of that has lend some support to 0:17:35.760 --> 0:17:39.400 the dollar. CNY again, the fix was wider, so all 0:17:39.440 --> 0:17:41.719 of this lending support, but I think that's not going 0:17:41.760 --> 0:17:44.120 to be long lasting. We continue to maintain the view 0:17:44.160 --> 0:17:46.560 that into the year end, we're looking at the DXY 0:17:46.640 --> 0:17:48.680 at ninety eight to that's above four or five five 0:17:48.720 --> 0:17:51.600 plus percent from here, and there are many different drivers 0:17:51.600 --> 0:17:51.880 for that. 0:17:52.680 --> 0:17:55.120 I guess the basic math is the FED raised more 0:17:55.160 --> 0:17:57.400 than everyone else, so it stands to reason that they'll 0:17:57.440 --> 0:18:00.000 probably eventually have to cut a lot. 0:18:01.480 --> 0:18:03.639 Yeah, definitely, And I think it's a lot of things right. 0:18:03.680 --> 0:18:06.640 I think we had us exceptionalism helped the dollar over 0:18:06.640 --> 0:18:10.200 the last two years, particularly, and you know, as you said, 0:18:10.200 --> 0:18:12.520 they've gone stronger as well on the rate side, so 0:18:12.560 --> 0:18:15.119 they have to cut more. But also I guess, you know, 0:18:15.119 --> 0:18:17.840 the rest of the economies. You know, you could argue 0:18:17.880 --> 0:18:20.760 about China where maybe the green shoots are not really 0:18:20.760 --> 0:18:22.680 there yet, but then you know, in Europe they're starting 0:18:22.680 --> 0:18:25.520 to see green shoots. The rest of the economies are 0:18:25.600 --> 0:18:28.959 now starting to look better. Sure, we've had technical recessions, 0:18:28.960 --> 0:18:32.320 so called Japan was not really there. You know, England's 0:18:32.359 --> 0:18:34.960 behind the New Zealand, but that's all backward looking stuff. 0:18:35.200 --> 0:18:38.040 Going ahead, I think the growth differential between US and 0:18:38.080 --> 0:18:39.960 the rest is narrowing, and so I think that will 0:18:39.960 --> 0:18:43.600 help the currencies of the other economies as well going forward. 0:18:44.280 --> 0:18:47.159 How do you see bond yields moving, particularly at the 0:18:47.200 --> 0:18:47.720 short end. 0:18:48.960 --> 0:18:51.280 Look, I think bond yields front front end hels are 0:18:52.080 --> 0:18:54.159 moving to the tune of what the FED says and 0:18:54.200 --> 0:18:57.480 what the expectations are. You know, we were at technical 0:18:57.800 --> 0:19:00.840 technical levels before. We're moving a little bit over from there. 0:19:01.119 --> 0:19:04.280 And look, I think fects markets, which we look at 0:19:04.520 --> 0:19:08.360 dollar is very strongly correlated to what front end shields do. 0:19:08.960 --> 0:19:11.600 At some point we think that should be moving south. 0:19:12.480 --> 0:19:14.680 As you know, we get more data, we're getting PC 0:19:14.920 --> 0:19:16.720 this week that should give us some idea as well. 0:19:17.200 --> 0:19:19.600 I'm a little surprised to see that you expect the 0:19:19.600 --> 0:19:23.240 FED to cut four times one hundred basis points this year. 0:19:24.800 --> 0:19:26.920 Yes, so we do. We are a little bit more 0:19:27.840 --> 0:19:31.440 you know, I would say dovesh shirt than the FED themselves. 0:19:31.520 --> 0:19:34.239 And I think, you know, inflation is coming down. Of 0:19:34.240 --> 0:19:38.080 course we've had two months of higher inflation, but clearly 0:19:38.359 --> 0:19:41.400 power has clearly pushed that back from where we see, 0:19:41.680 --> 0:19:43.760 you know, the communication coming from the FED and the 0:19:43.760 --> 0:19:47.320 way the direction of the inflation on allo underlying data, 0:19:47.359 --> 0:19:50.480 and the job market is starting to look a little 0:19:50.480 --> 0:19:52.840 bit softer, and all of that will warrant you know 0:19:52.880 --> 0:19:58.840 that that that hundred business points of easing this year, you. 0:19:58.760 --> 0:20:02.080 Know, given the dovish stand that the FED had, and 0:20:02.440 --> 0:20:04.600 admittedly you're a little more dubbish than the Fed, but 0:20:04.760 --> 0:20:08.560 still in sticking with the three rate cuts, I would 0:20:08.600 --> 0:20:11.720 have thought that Powell might have been talking a little 0:20:11.760 --> 0:20:16.879 bit more about slight weakness in the jobs market, but 0:20:17.000 --> 0:20:21.240 instead he seemed to be pretty confident in job creation 0:20:21.960 --> 0:20:24.359 and the fact that you know, it's pretty steady and 0:20:24.400 --> 0:20:25.040 pretty strong. 0:20:26.400 --> 0:20:29.600 Look, I think it's various indicators non pompios, of course, 0:20:29.640 --> 0:20:32.320 are painting a fairly stronger picture than the rest of it. 0:20:32.800 --> 0:20:34.719 When we look at the underlying data and we look 0:20:34.760 --> 0:20:38.120 at the wage tracker, Atlanta wage Tracker and a few 0:20:38.119 --> 0:20:40.440 other you know, the job openings and all of that, 0:20:40.720 --> 0:20:43.840 all of that has retreated quite a bit, and I 0:20:43.880 --> 0:20:46.760 think that will play into the data as we go along. 0:20:47.720 --> 0:20:50.600 But you know, whether they go seventy five or one hundred, 0:20:50.760 --> 0:20:56.120 surely you know, sorry, the FED will be moving pretty soon. 0:20:56.200 --> 0:20:58.320 We think June will be when they start June July 0:20:58.520 --> 0:20:59.960 or July is when they will start. 0:21:01.480 --> 0:21:03.159 I want to go back to the Bank of Japan 0:21:03.600 --> 0:21:06.440 because I've been thinking about this a little bit over 0:21:06.480 --> 0:21:09.000 the past week about whether or not it might have 0:21:09.080 --> 0:21:12.359 been smarter for them to say we're dropping yield curve 0:21:12.440 --> 0:21:15.560 control and we're going to stop the buying of bonds 0:21:16.760 --> 0:21:19.000 and you know some of the other changes that they 0:21:19.000 --> 0:21:22.000 put in place, rather than what they did, which is 0:21:22.400 --> 0:21:24.960 they dropped yield curve control, but they said they were 0:21:25.000 --> 0:21:27.560 still going to buy bonds as they saw a fit, 0:21:27.800 --> 0:21:30.440 and that's why the yen has weakened quite a lot. 0:21:31.680 --> 0:21:33.200