Insights

1 Minute Market Rundown – 28th November 2022

Risk Starts the Week on the Back Foot
China Protests Show You Can Only Push People So Far
Month End Flows and NFP Later in the Week Catch the Eye
Crypto Slides with General Risk

The week starts with events in China dominating the headlines. Protests against the draconian Covid policy have ramped up despite case numbers hitting record highs. The question is what will the response by the authorities be? There is a camp that believes this will lead to an acceleration in the relaxation of restrictions but I somehow struggle to see a complete regime change on the back of what the people want. That simply has never been how it works in China. A tough winter of high cases and discontent is coming and it’s hard to see how that is a positive for, primarily, the people or the markets.

Overnight we saw a severe sell off in risk assets with cross yen taking the brunt of the move. This has migrated into a USD sell off this morning which whilst being a continuation of the recent trends seems a little perverse to me. Whilst we are entering the end game for the year and the potential grows for a “window dressing” rally in risk that December sometimes provides, the general economic and political climate does not support this. Oil trades heavily and faces a multitude of headwinds, recession fears globally look more of a reality by the day and whilst some CB’s may be looking to ease back on rate hikes they are 12 months away from a peak/pivot lower.

In the short term we may see the Euro extend above 1.0500 and GBP try to regain 1.2150 but I have a sneaky feeling these rallies are going to end in tears before long. Month end flows are pointing to mild USD sales but I suspect a lot of this flow is being done in real time rather than passively anymore.

Crypto markets have broadly fallen led by Altcoins on the back of the risk mood. There is no change in view for me, with ETH sub 1250 and BTC sub 17250, combined with my general view of the world I will continue to look to play from the short side. Sub 1000 and 15,000 remain my targets.

Good luck as always!

Richard Usher – Head of OTC Trading

Richard-Usher

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