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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: When I'm bringing U Steven Englander, a global head of

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Speaker 2: G ten FX research over at Standard Charter Bank. So

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Speaker 2: careful policy approach, like, that's what has stood out to me.

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Speaker 2: That was a quote from Lisa Cook, careful policy approach.

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Speaker 2: How do you express that when it comes to them

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Speaker 2: the dollar?

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Speaker 1: Well, I think the market, before it sells the dollar,

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Speaker 1: wants to see that the dollar is kind of on

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Speaker 1: the front lines of cutting. And you know, with the

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Speaker 1: S and B cutting, the Swiss National Bank cutting last

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Speaker 1: week ahead of everyone else, discussion about whether Bank of

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Speaker 1: Canada ECB are going to be cutting and when they

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Speaker 1: might cut, the market's unwilling to sell the dollar on this.

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Speaker 1: We do think that if everybody cuts at the same time,

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Speaker 1: it's going to be very risk one and that kind

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Speaker 1: of risk on environment tends to be dollar negative, not

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Speaker 1: super dollar negative, somewhat dollar negative. But for the dollar

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Speaker 1: to be really soft, dollar has to go faster than

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Speaker 1: everyone else and reduce those rate differentials, and so far

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Speaker 1: that doesn't seem to be what the market is seen.

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Speaker 2: So for the dollar get to get materially weaker, we

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Speaker 2: need the FED to cut harder and faster than all

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Speaker 2: the other central banks, and that doesn't you don't see

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Speaker 2: that really happening.

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Speaker 1: Well, the market doesn't see it happening. We're a little

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Speaker 1: bit on that side. We see four cuts this year.

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Speaker 1: We think they're going to cut in June. There's an

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Speaker 1: outside chance that they cut in May, because they you know,

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Speaker 1: if you look at it, they're cutting three times with

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Speaker 1: the median of two point six percent two point five

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Speaker 1: to two point six percent inflation. There's an outside chance

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Speaker 1: will be there by May. So I wouldn't preclude it

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Speaker 1: if that's if that's the threshold. But you know, the

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Speaker 1: market's waiting to see it happen. I mean, unfortunately they're

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Speaker 1: not acting on our forecast.

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Speaker 3: But what's actually driving this though? I mean against the

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Speaker 3: economic backdrop. I mean there were a lot of people

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Speaker 3: that looked at the FED meeting last week and thought, okay,

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Speaker 3: is this maybe a little too dubbish. I mean, I

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Speaker 3: know that's what the market wanted, but against that economic backdrop,

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Speaker 3: why are we still talking about three to four cuts.

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Speaker 1: Well, you might call it yield differential preserving cuts. Okay,

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Speaker 1: so you know, if everybody cuts by you know, fifty

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Speaker 1: bases points over three months, the FED is still the

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Speaker 1: high yielder, right, and the market saying, what difference does

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Speaker 1: it make if it's the FED five and a quarter

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Speaker 1: and everybody else three or the FED foreign three quarters

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Speaker 1: and everybody else do it?

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Speaker 3: Okay, So this is more about the relative for investors here.

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Speaker 3: Then let's fold the yen into that conversation, because if

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Speaker 3: there's any sort of relative relationship that's been out of

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Speaker 3: whack over the last few years, it's been yen versus

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Speaker 3: probably I guess the rest of the world.

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Speaker 1: Yeah, look, you know the Bank of Japan has been

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Speaker 1: obsessed with the long end, whether it's because of Japanese

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Speaker 1: government debt, which will have a problem with the long

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Speaker 1: end moves up too fast, or because of the situation

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Speaker 1: of Japanese regional banks. What they did at the at

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Speaker 1: the meeting was kind of say, we're getting your YCC

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Speaker 1: the title, but everything we did under YCC we can

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Speaker 1: pretty much do in the future if we decide that

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Speaker 1: that's what we want to do. And I think the

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Speaker 1: market was pretty dissatisfied with that. On the other hand,

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Speaker 1: they do seem concerned about the end weakening and some

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Speaker 1: of the comments that's coming out since then suggest that

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Speaker 1: maybe they see a little bit more room for moving

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Speaker 1: quicker than the market had anticipated, so that would help

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Speaker 1: the end.

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Speaker 2: I mean, they definitely have verbally been in the market,

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Speaker 2: it just hasn't done anything to really help support the end.

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Speaker 2: And I'm just is the end ever going to get

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Speaker 2: some real steam to the upside? For example, because no

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Speaker 2: matter what, the rate differentials are going to be huge,

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Speaker 2: even if the BOJ hikes and the FED cuts, for example,

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Speaker 2: it's still going to be a fairly large differential.

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Speaker 1: Well, I think moving down by twenty five basis points

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Speaker 1: isn't going to do much. There's an old children's story

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Speaker 1: where the punchline is soft ice cream to soft ice

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Speaker 1: cream two hundred and fifty basis points of real yields

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Speaker 1: is two hundred fifty basis points of real yield. It's

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Speaker 1: very hard to resist. I think over time that should compress.

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Speaker 1: And the question I keep asking myself is all you know,

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Speaker 1: kind of all you're going to do is ten or

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Speaker 1: twenty basis points. Why bother? It's not as if anybody

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Speaker 1: cared that you were like, you know, kind of minus

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Speaker 1: ten you know for some rates. So it's quite possible

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Speaker 1: we'll see a more aggressive bon Jay interesting.

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Speaker 2: Also, I guess I found what's interesting too is that

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Speaker 2: where the repatriation thing we're all waiting for and sort

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Speaker 2: of the unwind of the carry trade, is that gonna happen?

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Speaker 2: As you say, ten twenty basis points who cares.

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Speaker 1: Well's strangely enough, even though we're all talking about the

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Speaker 1: US equity market, the Japanese equity market has way outperformed,

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Speaker 1: whether in common currency or local currency. The euro areal

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Speaker 1: equity market is outperformed. So you know, there is a

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Speaker 1: question if the market decides that some capital should be

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Speaker 1: going back because there's value there and that would be

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Speaker 1: a big help. So far, that hasn't been the decision.

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Speaker 1: That's more focused as we started by saying, who goes first?

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Speaker 1: And so who do we hit first?

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Speaker 3: All right, Stephen, always great to talk to you. Stephen

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Speaker 3: ng Under, Global head of G ten FX Research over

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Speaker 3: at Standard a Charter