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Speaker 1: We're joined by our next guest, Major Ben Zaman here,

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Speaker 1: his head of FFX research at A and Z to

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Speaker 1: talk about the latest on the markets. And I just

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Speaker 1: want to start by zooming up really and looking at

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Speaker 1: the big picture. We had a strong non farm payrolls

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Speaker 1: from the US. We've got CPI coming up this week,

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Speaker 1: and it was cost consumer prices last month that really

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Speaker 1: set markets freaking out. So what are you watching in

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Speaker 1: terms of CPI and do you think it's going to

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Speaker 1: change the narrative from the Fed? UM, thanks for having me.

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Speaker 1: I think, Um, what we saw in August was really

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Speaker 1: the core goods side of things, which shot up. UM

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Speaker 1: this month again, we will be closely watching core good

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Speaker 1: prices in the CPI data includes you know, personal care UM,

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Speaker 1: and I guess the key worry is about inflation expectations

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Speaker 1: coming through. They should effect in the effect to be

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Speaker 1: really falling. As import prices are coming down. Commority prices

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Speaker 1: selectively are also lower than they were before. UM. Supply

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Speaker 1: chain improving although gradually UM, So I think we are

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Speaker 1: watching that side of things. And then of course, UM,

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Speaker 1: what's important with the earning season around the corner is

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Speaker 1: that the many companies which earned US companies which earned

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Speaker 1: their revenues overseas. UM, what's the dollar impact to their

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Speaker 1: pn L? UM? How much translation risk is it going

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Speaker 1: to be? UM? It's definitely looks to be a little bit,

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Speaker 1: may be higher than previous years. And because of that,

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Speaker 1: UM will that that price be passed through to the consumer.

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Speaker 1: So that's that's something we were looking out for. We

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Speaker 1: know the dollar is very strong, UH, and there's always

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Speaker 1: the possibility for some dislocations in markets, some sort of

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Speaker 1: financial instability. UH. One of the things that we've been

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Speaker 1: looking at is is how a lot of a lot

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Speaker 1: of countries have had to dip into FX reserves to

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Speaker 1: support their own local currency. Is that something that is

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Speaker 1: anywhere near close to causing a major problem or just

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Speaker 1: not yet? Look, I think this period of dollars strength

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Speaker 1: is a little bit different from earlier periods and earlier

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Speaker 1: periods where we saw, you know, a lot of EM vulnerability.

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Speaker 1: This time, if if I may say, it's a little

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Speaker 1: bit different, UM, I think, UM, the difference is really

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Speaker 1: how UM you know, developed market center banks have chosen

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Speaker 1: to respond to these high inflation pressures versus e M

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Speaker 1: central banks. UM. You know, FED was a bit late

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Speaker 1: to the game in raising rates, and by the time

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Speaker 1: they started, many of these emerging market center banks had

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Speaker 1: already started the hiking cycles. And as a result of that,

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Speaker 1: when we look at you know, you to day performance

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Speaker 1: of you know, you know the ausy KEYWI Euro versus UM,

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Speaker 1: you know, the Brazilian Real, Mexico and the rest, you

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Speaker 1: see that you know, in fact, DM currencies are somewhat

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Speaker 1: bit worst off than some of these e M currencies

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Speaker 1: for that reason because they took a head start. Yeah,

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Speaker 1: one of the central banks, of course, with the most

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Speaker 1: divergence against the FED is the p BOC. UM. We

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Speaker 1: do have the People's Congress coming up in China, however,

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Speaker 1: are you anticipating any major policy changes there, particularly around

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Speaker 1: COVID or stimulus that could potentially change the picture before

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Speaker 1: the ad to say much at this stage, and we

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Speaker 1: know that UM, the PBOC has been actively uh taken

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Speaker 1: a variety of measures to support the Remember UM, it's

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Speaker 1: really similar to the b o J as well with

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Speaker 1: with the intervention that we saw earlier. It's not really

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Speaker 1: preserving the levels, but it's just managing the pace of weakness.

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Speaker 1: And especially because PBOC has that divergent policy. We we

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Speaker 1: definitely do see a little bit of a weak again

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Speaker 1: ahead UM, but just not extreme moves, managed moves. So

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Speaker 1: I see in the notes that you're you're prepared to

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Speaker 1: talk about the earning season that's coming. We're starting to

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Speaker 1: see more and more commentary from strategy that the earning

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Speaker 1: season uh, could could be could be difficult, even if

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Speaker 1: inflation comes down a lot. And maybe because inflation comes

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Speaker 1: down a lot. I think the thinking there is that

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Speaker 1: you know, companies here today we're able to offset the

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Speaker 1: higher costs with higher prices, but if inflation is coming down,

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Speaker 1: they don't have that option anymore. By definition, UH, they

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Speaker 1: won't have it. UH. And it means it means you know,

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Speaker 1: lower margins. Yes, UM, it depends on which sectors we

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Speaker 1: look at again, UM. Really the strong US dollar cycle

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Speaker 1: will continue to remain a headwind for multinationals UM. On

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Speaker 1: the EPs side, UM hedges are now also rolling over.

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Speaker 1: And if you're looking too, if a comportation we're looking

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Speaker 1: to hedge, it's more expensive to hedge, whether it's from

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Speaker 1: a commodity perspective or currency standpoint. So I think, UM,

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Speaker 1: some of this may be already priced in. UM we

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Speaker 1: will have to wait to see what whether they you know,

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Speaker 1: the guidance around and see impact will be announced you

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Speaker 1: know at this stage or at the next quarter. You know,

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Speaker 1: neither the fully on your results. Instead, I went to

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Speaker 1: see the full impact. How does it work? I mean,

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Speaker 1: if companies complain about the impact of a higher dollar,

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Speaker 1: do the policymakers listen? Um? Look, I think there's there's

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Speaker 1: nothing stopping the FED at this stage. We know, you know,

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Speaker 1: FED is, FED is pretty much firm on what they're

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Speaker 1: going to do. Um. You know, the FED speak has

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Speaker 1: been the clear, loud and clear. Um. You know, markets

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Speaker 1: are conditioned on a FED poot which has been based

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Speaker 1: on previous low inflation. That's not the case right now. Yeah. Yeah,

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Speaker 1: I don't talk to me. I'm busy, you know, it's

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Speaker 1: that sort of thing. Yeah, okay, thanks very much. Maj

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Speaker 1: Being Zaman, Head of FX Research at A n Z.