1 Minute Market Rundown – 30th September 2022
Random Month End and Quarter End Moves
Stocks Suffer Badly
USD Position Squeeze Continues
I have tried to write this piece 3 times today and frankly it is a struggle. The moves over the last 24-48 hours have been brutal and random. Correlations that have broadly held all year have broken down as a combination of quarter end flows and deleveraging of positions takes hold. Yesterday was a perfect example of this as stocks went down 2-3%, Yields ticked back higher yet the USD suffered badly against the Euro and GBP. 0.9650 to 0.9840 and 1.0750 to 1.1200 were hard to explain aside from a huge unwind in shorts. All we can do is let this play out and the dust settle before reentering trades. With month and quarter end today, more random moves are likely.
I sit back and look at everything going on and find myself in 2 minds. There is bad news everywhere and the USD still looks like the only game in town. Then I find myself thinking about the market’s job which is to price in expectations and I wonder can there really be any more bad news to come? Well, yes there can but I’m not sure it will be as widespread as recent events.
I struggle to see how GBP on a weighted basis can outperform in the current environment whatever the government does from here. Stand by policy and it is bad, unwind it shows weakness and a potential confidence vote. I will still put my money elsewhere and GBP/USD back at 1.1200-1.1500 feels high out of nowhere. The Euro woes will continue over the winter for sure and EUR/CHF shorts still hugely appeal medium term.
Stocks are the fly in my underperformance ointment. I find myself starting to accumulate US stocks and I suspect there will be a decent return of 10% from these levels during Q4. The problem is where do they dip first?
My Crypto view remains identical to yesterday. Out of focus and holding in relatively well all things considered. The longer this continues the more I get confident the next significant move is higher, but for now the TradFi markets are at the centre stage…it will not be the case for long…
As always, good luck out there!
Richard Usher – Head of OTC Trading
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