Russell Shor

The intermarket implications suggest a risk-off environment as the higher yield pressures the present value of risk and capital rotates towards the greenback for safety.

UK Prime Minister Liz Truss announced her resignation today. A run on British gilts and volatility in GBPUSD has primarily defined her six weeks in office following a failed gamble at expansionary fiscal policy and trickle-down economics

The FXCM US.BANKS basket has moved into its bullish channel between the upper blue and red bands (top). Moreover, its stochastic (middle) is moving towards the 80+ levels (red arrow). If it hits and maintains, the positive momentum will likely be price supportive.

The NAS100 has a positive sentiment heading into the cash open. The H4 chart on the left shows the index positioned between the upper blue and red bands in its bullish area. However, the hourly chart on the right suggests a potential higher trough (HT?). An hourly close above the green horizontal would increase the likelihood of this scenario and lay the platform for the next higher peak.

There was stabilisation after the new Chancellor of the Exchequer, Jeremy Hunt, rolled back most of the tax cuts delivered in September's mini-budget. However, all is not well, with the UK government cutting the Energy Price Guarantee from two years to six months.

The US30 jumped 2% yesterday, pushing the index into its bullish area between the upper blue and red bands. The daily stochastic is heading towards the 80+ area (green rectangle). If it hits and maintains, an underlying bullish momentum will be present.

The week FXCM market specialists Russ and Nik discuss the u-turn in PM Liz Truss's policies. Inflation remains rampant and sticky, with core CPI surprising to the upside. The terminal rate jumps to 5%, with the following two meetings for 2022 expected to hike at 75bps each. USDJPY reaches 32 years high, as central bank policies diverge. Please listen in for the above and more.

Last week's real rate price action is insightful and shows a Doji candlestick (red arrows). The real yield attempted to move higher and lower but closed flat for the week. This activity implies uncertainty and indecision. Moreover, this comes when the real rate is overbought (green rectangle).

Kwasi Kwarteng, Chancellor of the Exchequer, was fired today, less than a month after he delivered his mini-budget on 23rd September. It had a devastating and destabilising market effect, as investors exited British gilts en masse, concerned about the level of deficit funding.

Yesterday's CPI print surprised to the upside. Headline CPI came in at 8.2% y/y against an expectation of 8.1% y/y. However, core CPI is up 6.6% from a year ago. This print matched the previous release and is the fastest rate of change since 1982.

The pace of central bank interest rate hikes and Covid restrictions in Shanghai and Shenzhen are taking massive tolls. These policies will likely cap crude prices, limiting any production cuts' support.