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Speaker 1: Let's get to our guests. Julia along is with as

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Speaker 1: Julia's executive director and global market strategist at JP Morgan

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Speaker 1: Private Bank. She joins us from our studios in Hong Kong. Juliet,

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Speaker 1: it's always a pleasure to benefit from your perspective. You're

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Speaker 1: so smart on these markets, and I want to begin

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Speaker 1: with what's going on with US interest rates? FED policy.

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Speaker 1: We saw a move lower today across the treasury curve

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Speaker 1: and I'm wondering how much of that is tied to

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Speaker 1: the expectation that we've hit peak inflation and that it's

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Speaker 1: going to begin decelerating at a pretty healthy clip. Thanks

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Speaker 1: for having me on the show, um So, I think that, um,

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Speaker 1: we are starting to see a more balanced picture between

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Speaker 1: growth and inflation emerging in many parts of the world.

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Speaker 1: We see that leading to some of more devish tone

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Speaker 1: from the e C, b UH and and Bank of

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Speaker 1: Canada and before that the the r b A as well.

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Speaker 1: Um So, I think that that is the back drop

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Speaker 1: that may have led to some hope for a more

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Speaker 1: balanced toe from the Fed as well. We do think that, um,

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Speaker 1: that is warranted, but we feel that, um, you know,

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Speaker 1: the inflation picture really it's still inflation is still really

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Speaker 1: too hot at the moment um. So for us to

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Speaker 1: get to a point where there is a really an

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Speaker 1: easy signal from the FAT, I think we're still a

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Speaker 1: very long way off, so we will be very wary

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Speaker 1: of I think, chasing this UH, this hope for a

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Speaker 1: tone in the market for too much. So going forward

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Speaker 1: seventy five basis point in November seems to be pretty

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Speaker 1: much a lock for the Fed. But if any pivot

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Speaker 1: still some time off, what might we see a few

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Speaker 1: more supersized hikes. We definitely think that, UM, Like you

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Speaker 1: need to bear in mind the backdrop for markets right

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Speaker 1: now it's still an inflation trading regime UH, and inflation

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Speaker 1: is too high, and labor markets it's too tight, employment

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Speaker 1: rated three point five percent MUNTI decade low. And for

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Speaker 1: us to get to a point going where that's consistent

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Speaker 1: with the FAT long term inflation target UM, it's going

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Speaker 1: to take us a decent twelve month or even longer.

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Speaker 1: So I do think that the near term risk is

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Speaker 1: for UH inflation to be a little harder than the

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Speaker 1: market expects. And the FAT having made me to raise

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Speaker 1: beyond four point five to four point seven five range,

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Speaker 1: and but more importantly, staying there until we see a

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Speaker 1: substantial improvement in the inflation trajector. Yeah, Bloomberg Economics, I

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Speaker 1: think is looking for a terminal rated five percent. I

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Speaker 1: think a lot of that is already been discounted by

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Speaker 1: the market. And I'm wondering now whether or not that

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Speaker 1: means that the dollar will remain strong for for a

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Speaker 1: period of time. Is that the way you see it? Um? Yeah,

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Speaker 1: I think that, um, you know, five percent is is high.

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Speaker 1: We don't know if that's high enough. Um. And I

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Speaker 1: think that the other leg to that, it's just how

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Speaker 1: how long the fat stays restricted with monetary policy. Uh.

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Speaker 1: And bring that to the dollar, it does mean that

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Speaker 1: if you combine the growth and interest rate backdrop of

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Speaker 1: the dollar visa VI other currencies b h G, ten

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Speaker 1: or emerging market, it's very hard to paint a picture

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Speaker 1: of an immediate dollar reversal. And actually, if you think

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Speaker 1: about dollar versus global growth backdrop is actually printing we

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Speaker 1: think a pretty fair so historically we only have such

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Speaker 1: a modest overshoot of dollar valuation. It's historically you don't

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Speaker 1: see an immediate reversal in the year after, So we

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Speaker 1: think that most likely dollars stay strong. UM for next

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Speaker 1: year China, the People's Congress is over j and Pings

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Speaker 1: got the third term as we expected, but of course

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Speaker 1: there's no real economic reformists in a in a circle,

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Speaker 1: which did somewhat spook markets. Has your investing thesis around

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Speaker 1: China changed after the People's Congress? UM? Well, to be honest,

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Speaker 1: not so much, because UM, I think the Party Congress

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Speaker 1: really reaffirmed some of the longer term goals that have

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Speaker 1: gradually crystallized over the last couple of years. UM. They

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Speaker 1: will invest very heavily innovation to try to close the

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Speaker 1: technological gap as much as possible, UH, transform the economy

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Speaker 1: in terms of energy sources towards greener sources of energy UH,

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Speaker 1: and beyond those two most pressing UH agenda UM, try

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Speaker 1: to redistribute income towards the poor families and income inland provinces,

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Speaker 1: so in terms of regional development. So all of these

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Speaker 1: are fairly long term goals that I think we've we've

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Speaker 1: we've been quite grown quite familiar with over the last

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Speaker 1: couple of years. I think, UM, you know, relative to markets,

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Speaker 1: where where we are with versus in terms of thinking

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Speaker 1: for next year, is that, UM, we don't really expect

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Speaker 1: because of its long term goals, we don't expect a

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Speaker 1: lot of policy easing. We don't expect you turn around

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Speaker 1: the housing market, and probably I think, UM, that's still entertained,

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Speaker 1: I think by by fair chunk of market participants. So

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Speaker 1: I think that that maybe a gap, you know, in

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Speaker 1: terms of differences of where we are versus the market

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Speaker 1: right now. So how are you waiting a move by

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Speaker 1: the Biden administration to halt some of the technological progress

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Speaker 1: in China by withholding certain technology where semiconductors are concerned.

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Speaker 1: And Brian and I were talking before the program, and

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Speaker 1: he was pointing out that maybe there's a risk of

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Speaker 1: certain pharmaceutical or biotech technology being withheld as well. I mean,

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Speaker 1: do moves like this on the part of the US

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Speaker 1: really have the potential to hold back economic activity in

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Speaker 1: China to a great degree? UM. I think it certainly

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Speaker 1: makes the policy trade off tougher. Three in a sense

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Speaker 1: that UM obviously resources and policy resources a finite, so

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Speaker 1: you have to kind of prioritize UM. And I think

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Speaker 1: that the Party Congress affirmed to us that the priorities

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Speaker 1: really are with regards to innovation, great green transition and

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Speaker 1: with regard to innovation, so these priorities are very clear, uh,

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Speaker 1: and that leaves I think less resources and policy room

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Speaker 1: with regard to um you know, uh things like the

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Speaker 1: housing market. So I think, um, you know what's happening

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Speaker 1: with with the technological um uh competition. Really, I think

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Speaker 1: it's another um move that probably of firms or highlights

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Speaker 1: just how priorities have are shifting in China UM. So

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Speaker 1: I think that it does make the policy trade off

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Speaker 1: much tougher for the economy and probably for financial markets

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Speaker 1: as well. I want to talk a little about Japan

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Speaker 1: before we let you go. It is, of course a

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Speaker 1: big decision day for the Bank of Japan today, but

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Speaker 1: we've got the hottest Tokyo CPI that we've seen since

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Speaker 1: nearly half a billion US dollars in stimulus coming down

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Speaker 1: the pipe from the government as well. Is a policy

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Speaker 1: shift inevitable at some point from the bo J When

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Speaker 1: do you think we're going to see it? M I

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Speaker 1: don't think it's inevitable actually, I mean, if you look

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Speaker 1: at the underlying economy of Japan, UM, it's not really

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Speaker 1: in the same place as the US. In fact, no

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Speaker 1: other economies in the same place. Japanese GDP is not

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Speaker 1: back to pre COVID level yet, So I think that, um,

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Speaker 1: the effectiveness of tightening monetary policy when enderlying economic environment

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Speaker 1: does not warranted. I think it's it's it's kind of questionable,

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Speaker 1: So we don't really think, um, they're from an economic

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Speaker 1: fundamental perspective in a position to to tighten policy. What

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Speaker 1: about the yen and how weak it's been. I mean,

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Speaker 1: we've seen intervention maybe on at least two separate occasions,

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Speaker 1: and I'm wondering whether here in the near term, at

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Speaker 1: any rate, that we have seen UH an end to

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Speaker 1: two yend weakness. So UH, the way we look at UH,

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Speaker 1: you know, fair value for the yend UH is really

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Speaker 1: coming from the interest rate differential UH model of framework.

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Speaker 1: And on that framework, one fifty is actually quite fair

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Speaker 1: given where interest rate differentials are between the US and Japan.

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Speaker 1: And if we, of course see further upsiders to US yolds,

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Speaker 1: then um, that differential gets larger. So there is very

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Speaker 1: little standing the way at the moment, I think for

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Speaker 1: further yend depreciation. All right, Julia Wang will have to

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Speaker 1: leave it there. Thanks so much for joining us on

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Speaker 1: Bloomberg Day Breakage. Julia Wang as executive director and Global

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Speaker 1: market Strategist at JP Morgan, a private bank,