Daily Market Outlook, September 26, 2022

Overnight Headlines

A further wave of risk-off sentiment has weighed on equities at the start of the week. Overnight in the Far East, major stock markets have fallen further, following on from losses globally last week. Flows into the US dollar have continued to push the greenback higher against most other major currencies, heightening speculation that some countries may intervene to support their currencies. Notably, GBP/USD hit a record low around 1.035 earlier this morning, before recovering back to around 1.06, while the euro briefly dropped below 0.96 vs the dollar. Meanwhile, following yesterday’s Italian election, Giorgia Meloni – the leader of the far-right Brothers of Italy party – was on track to become the country’s first female prime minister.

Over the past week, markets have been rattled by a further tightening of monetary policy from a series of central banks. Most prominent was the 75-basis point interest rate hike from the US Federal Reserve; the Bank of England also announced its second successive 50bp rise; while other central banks to tighten included those of Norway, Sweden and Switzerland. Possibly of most concern to markets was that most of them signalled that further hikes remain very likely. The new median forecast of the Fed’s policymakers implies about 125bp more of interest rates rises by year end with rates expected to rise at least a little further in 2023.In response to this news equities have had another rough week as concerns about global economic growth continued to mount. Later today, the OECD will publish its latest assessment on the global growth outlook. In its previous update in June, the organisation slashed its estimate for this year to just 3%.

Today’s calendar is littered with a number of speakers from the major central banks. ECB President Lagarde along with Governing Council members Guindos, Nagel, Panetta and Centeno are all scheduled to speak today at separate events. Later this week, eurozone inflation is expected to print at a record high, keeping the pressure on the ECB to deliver further hikes in interest rates, following the 125bp worth of increases implemented over the past few months. However, with signs of growth slipping and ongoing market turmoil, today’s comments will be watched closely for insight into how policymakers are likely to proceed.

Today’s German IFO survey for September is expected to provide a timely reminder that the Eurozone’s largest economy continues to cool. Expect the headline business climate measure to drop to 86.9, reflecting declines in both the future expectations and current assessment components. Elsewhere, a number of US Fed members are due to speak, including Bostic, Logan, Mester and Collins. However, it is questionable as to how much further we will learn so soon after the Fed’s hawkish message at its meeting last week. UK-wise, the focus is limited to MPC member Tenreyro’s speech this afternoon at an ‘E-Axes Forum’ webinar on climate change. However, in the absence of any views on the near-term policy outlook, markets’ attention on this event is likely to be low.

EURUSD Bias: Bearish below 1.0250

GBPUSD Bias: Bearish below 1.10

USDJPY Bias: Bullish above 139

AUDUSD Bias: Bearish below .70

BTCUSD Bias: Bearish below 25.3K

BTC back below 19k
BTC is still down ~58.5% so far this year
CFTC – BTC specs +451 contracts, long rises to 577 contracts; BTC -6.23% in period
Thomas Bravo to pause investments in crypto companies – FT
20 Day VWAP is bearish, 5 Day bearish