Jan 17, 20233 min read

#USDJPY implied vols sky high / 2023 USD forecasts lower / UK wages / Hildebrand / All about BoJ now

Major investment banks....already revising their USD forecasts lower, EURUSD to 1.15 byend of 2023, IF they do this they will soon revise their #SPX00 forecasts higher too !!...this is clearly the potential implication..
Who is Lee Koguan, the Elon fanboy and one of Tesla's largest shareholders who now says Musk has 'abandoned' the EV maker. Fully Electric Vehicles made up almost 10% of all new cars sold globally in 2022 - WSJ
Frau Lambrecht resigned as German Defense Minister
Morgan Stanley says European stocks san extend lead over the US, optimism on China, earnings supports Europe’s outperformance. Secker also sees boost from light positioning, sector trends
Hildebrand, fast path down for inflation in 2023 from 9 to 4%, 2% won't happen for long while, no more QE, new world and does not see rate cut this year (agreed, this what we have been talking about for a while, as the most likely scenario, and the 200bps of rate cuts priced in by Dec 2024, seems rather big at this stage!)
WEF's annual meeting began with corporate executives and economists warning of a worldwide recession this year. A PricewaterhouseCoopers survey found 73% of 4,410 business leaders predicted global growth will decline over the coming 12 months, the worst since the poll began in 2011...>>> ie the most anticipated recession , ever
UK wages rising at near record pace, clear labour shortage >> hard to se BoE hike only 25bps at next meeting with these kind of data, which would put both ECB and BoE going 50bps, while FED is 'only' going 25bps
China population: 2022 marks first decline in 60 years. Mainland China’s overall population fell to 1.4118 billion last year, as the growth rate hit negative 0.6 per thousand people
Markets are passed the "peak Fed hawkishness" and "peak inflation." But an "earnings peak" has yet to be fully digested/thread-chart
BoJ's real goal, ideally, is to get our of YCC, which started in December (earlier than many thought in markets), now Kuroda on his way in April, they will continue to adjust rates, but what they are desperately trying to do is getting out of YCC (say 2%) without JPY strengthening massively..clearly a tough ask!

Markets :

UST's net speculative still heavily short and near multi-year lows
USDJPY (chart below) overnight implied vols over 30%, which means a 1day straddle costs 320 JPY pips! the market is expecting some volatility!.. low delta trading near 40-50% implied.. >>> so we could trade between 125 and 132 USDJPY ! strap yourselves in, Kuroda this afternoon - please don't ask what I think (ok some of you asking.....IMHO, the market has anticipated and priced in a lot from BoJ already last couple of weeks...
Equity markets : we all know about technical levels in SPX500, VIX (eq implied vols) remain soft, and a slightly softer USDdollar overall will help risk going forward, but it's January and Jan markets are always/often subject to sharp turnaround