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Speaker 1: Our guest is Chris Weston, head of research at pepper

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Speaker 1: Stone Group. Chris, we'll get to the r b A

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Speaker 1: and we'll get to oil in a few moments, but

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Speaker 1: let's start off with the FED. We can't really expect

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Speaker 1: anything too definitive from policymakers. We've got a couple of

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Speaker 1: CPI reports between now and the December meeting, and that

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Speaker 1: seems to be the one that people are quite curious about.

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Speaker 1: But I'll be interested to see if if there any

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Speaker 1: comments on a couple of points. One, do they speak

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Speaker 1: of some positive signs like lower housing prices and and

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Speaker 1: lower shipping prices? And to do they hint that some

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Speaker 1: time to assess would be prudent. Do you think we

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Speaker 1: get either of those? On the first point, I think

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Speaker 1: that probably the way they would frame that would be

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Speaker 1: that some of the interest rates sensitive sectors the sharing

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Speaker 1: signs of of slow down and and and that's a

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Speaker 1: positive sign. But then obviously that there's going to be

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Speaker 1: a lot of nuance, and I think the whole statement

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Speaker 1: is going to be covered with nuance and conditionality and

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Speaker 1: flexibility is going to be the two sort of ways

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Speaker 1: I'm going to be looking at so UM while the

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Speaker 1: interest rates, sector sensitive sectors of obviously showing signs of

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Speaker 1: slow down. The offset will be that there's a lot

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Speaker 1: of the sticky inflation. The core inflation is going to

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Speaker 1: be persistently high. Um. So I think that that's that's

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Speaker 1: the key factor within within the message. But I think

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Speaker 1: generally speaking with with the FED, um, you know, I

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Speaker 1: think that that they will welcome some signs and but

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Speaker 1: I think at the same time, when that when we

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Speaker 1: talk about the step down, which is obviously the key

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Speaker 1: focal point, whether they where they sort of initiator, you know,

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Speaker 1: a slower pace into the December meeting and the guidance

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Speaker 1: around that. For me, it's about giving themselves maximum flexibility

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Speaker 1: for that meeting, which means that the the guest semi five

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Speaker 1: basis point could be on the table, fifty basis points

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Speaker 1: could be on the table, and it really is going

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Speaker 1: to be very much data dependent. So I think this

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Speaker 1: is a fad that that still would rather have the

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Speaker 1: US going into recession than have persistently high inflation, and

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Speaker 1: that means that they have to have conditionality attached this

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Speaker 1: and flexibility. So I mean that's all about their credibility,

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Speaker 1: isn't did Ultimately and the point is how much pain

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Speaker 1: that they prepared for the US economy or indied global

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Speaker 1: economy to sustain as a result of that. Well, I

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Speaker 1: think that they still sit in the glass half full

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Speaker 1: camp that if there was a recession, it's going to

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Speaker 1: be very mild. Um. We we we probably also need

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Speaker 1: to believe that the midterms will hold some bearing towards this,

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Speaker 1: in the sense that if if the bookies are, if

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Speaker 1: the betting markets are indeed on the money, and we

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Speaker 1: get the Republicans taking both chambers of Congress and obviously

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Speaker 1: we've got Biden the White House, White House, then going

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Speaker 1: up until four, really there's going to be absolutely no

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Speaker 1: fiscal support. Any new fiscal support is going to struggle

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Speaker 1: to get through. It's going to be all the heavy

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Speaker 1: lifting is going to be done by the Federal Reserve effectively.

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Speaker 1: So yeah, we have to believe that slow down will

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Speaker 1: be will be managed well by then. So there's a

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Speaker 1: debate on the r b A, whether it will go

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Speaker 1: twenty five or fifty, but we know that the swaps

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Speaker 1: imply only are one in five chance of an outsized

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Speaker 1: of which way do you think they'll be moving. I'm

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Speaker 1: firmly in the twenty five basis point. Camp. I mean,

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Speaker 1: I still think that we have a reminiscence of the

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Speaker 1: Annaka Foundation, that speech that came from the eighth September,

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Speaker 1: which really started this whole sort of Davis shift that

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Speaker 1: the market is now you know, firmly sort of sort

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Speaker 1: of critiquing, I guess, Chris, I mean, we could talk

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Speaker 1: about the interest rates and one of the FED and

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Speaker 1: the RBA are likely to do here as well. But

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Speaker 1: given what to go on market wise, we're not getting

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Speaker 1: much traction, are we? And you know, I suppose you've

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Speaker 1: got to also be looking at what the earning season

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Speaker 1: has been telling you too, which and that's my question,

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Speaker 1: how is it informing you about the macro side of things? Well,

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Speaker 1: I mean, I think certainly big texts have been been

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Speaker 1: the big one there. Um. I think, you know, when

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Speaker 1: we started off the earning season and we had the

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Speaker 1: banks telling us that things are okay, um, and we

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Speaker 1: were getting some some good insights, positive insights from the consumer.

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Speaker 1: I think, really, when we get the Walmarts of this world,

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Speaker 1: and you know, we start getting the the the big,

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Speaker 1: the big retailers, that's going to be something that that

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Speaker 1: could give us some giin insights as well, because that's

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Speaker 1: when we are watching is obviously how now this is

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Speaker 1: going to impact the consumer. And we're gonna get I

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Speaker 1: s M services this week, which will probably say a

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Speaker 1: similar sort of picture. But generally, on the whole, it's

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Speaker 1: it's still the big thematic continues to be trading peak rates.

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Speaker 1: That's that's the dominant situation. I know we've we've got midterms,

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Speaker 1: and that may have some some small dyations, very small gyrations,

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Speaker 1: but generally it's peak rates which continues to be the issue.

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Speaker 1: So we're moving through the earning season, I think it's

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Speaker 1: gonna be less factor now. Um and yeah, I think

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Speaker 1: on the whole it's it's been a fairly neutral earning

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Speaker 1: season for the market. I'm starting to hear more from

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Speaker 1: traders about maybe playing alongside and that revisiting the lows

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Speaker 1: that we saw may not be as likely as continuing

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Speaker 1: to grinder head. When you look at things from that

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Speaker 1: kind of you know, thirty five thousand feet, what what

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Speaker 1: do you see? I just you know, as a trader,

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Speaker 1: I just think keeping an open mind. I think you

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Speaker 1: just go over the tape now you can you can

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Speaker 1: make an argument for us to revisit the lows, you know,

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Speaker 1: things like constated tightenings or something that that needs to

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Speaker 1: be pushed in, especially just seeing the refinancing situation, which

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Speaker 1: means they're going to have to increase the t g

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Speaker 1: A by six hundred billion dollars two six million dollars

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Speaker 1: to buy including another hundred and fifty billions. So yeah,

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Speaker 1: I think that that's that's that's an issue for the markets. Um.

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Speaker 1: But you can also say that, you know, if if this,

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Speaker 1: if we do see enough from the Federal Reserve, which

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Speaker 1: I think I actually see them are sort of hawk

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Speaker 1: is camp for this week, but you know, if they

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Speaker 1: were to open the door a little bit, this market

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Speaker 1: could could rally, and you don't want to be left

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Speaker 1: behind in that situation. So I think the risks in

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Speaker 1: this market you can paint them either way. I think

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Speaker 1: you just gotta have an open mind and trade the

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Speaker 1: price and trade the tape because it's it's Yeah, I

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Speaker 1: think we just expect to be surprised, but I'd probably

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Speaker 1: probably say this probably went down was in the act market.

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Speaker 1: Here just briefly, what's the tape giving you, Well, the

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Speaker 1: moment we're right market moment, we're rallying. We've sort of

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Speaker 1: got into the hundred day meeting average and the prices

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Speaker 1: it seems to be capped around in S and P futures.

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Speaker 1: But you know, we're sort of feeling a bit of

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Speaker 1: exhaustion and we sort of yeah, yeah, I think we're

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Speaker 1: kind of stuck in this situation where we're probably be

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Speaker 1: at best and going to consolidate. Maybe a slight downside

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Speaker 1: bias here, but you know, the market has been going

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Speaker 1: up and that has to be respected. But for now,

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Speaker 1: I think we've probably run into a bit of resistance. Um.

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Speaker 1: You know a lot of short coverings come through very

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Speaker 1: much cleaner structure. Um. I don't think anyone really wants

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Speaker 1: to put any risk on ahead of the FED meeting.

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Speaker 1: We'll have to see what their guidance is for December. Chris,

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Speaker 1: what are you What's the question that clients are most

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Speaker 1: asking you at the moment that Pepperston and actually what

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Speaker 1: are the bets that make your markets overall? Too? I

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Speaker 1: think probably the dominant one right now is you know,

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Speaker 1: we've we've seen the dollar. It's it's all really about

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Speaker 1: the US dollar. I think, you know, obviously the wrecking

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Speaker 1: ball that is everyone focused on that situation, and we

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Speaker 1: keep continue to guide people to two crosses, one one

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Speaker 1: being dollar s and HD China dollar China that that

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Speaker 1: looks like it's making a tilted new highs. If that does,

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Speaker 1: you know, break into those new highs, then then I

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Speaker 1: think the dollar more broadly across G ten will will

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Speaker 1: come on wall rally um and then obviously Dolly, can

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Speaker 1: we make a move back into intervention and levels above

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Speaker 1: one fifty. But generally speaking, now you know, with the

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Speaker 1: terminal rate back above or be able looking to test um,

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Speaker 1: you know, the five percent level, and also with real

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Speaker 1: rates five year real rates bouncing off one fifty and

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Speaker 1: looking like they might move higher, then I think the

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Speaker 1: general consensus is from speculators that you know that the

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Speaker 1: US dollar has probably got a little bit further to

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Speaker 1: go in the upside, and you know, as a view

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Speaker 1: that I firmly share Chris, it was a pleasure, Thank you,

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Speaker 1: miner did Chris Wes in their head of research at

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Speaker 1: the Pepperstone Group, just getting his take on the market,