00:00What is top of mind, Adam, for you right now?
00:01I mean, we're looking at the intervention story around Japan.
00:03It was huge for the FX markets yesterday.
00:07Oil seems to be a little bit better behaved right now,
00:10even though President Trump is saying that he continues the blockade.
00:13The Japanese suggested they might intervene in the oil markets.
00:16The Strategic Reserve has been tapped.
00:17What, for you, when it comes to the oil story, the FX story, is top of mind right now?
00:20I think it's definitely the FX story.
00:22I mean, obviously, a lot of European markets are closed today, so that definitely factors in.
00:26And I think in terms of dollar-yen, what yesterday achieved, if anything,
00:29was potentially a bit of a line in the sand for 160.
00:32But in terms of that, I'm still cynical about how much impact this intervention will have.
00:37I mean, yesterday, when we saw the moves, a lot of people were saying,
00:39is this actually intervention?
00:41Because historically, they do look relatively muted,
00:43and we're actually seeing them kind of reverse a bit today.
00:46The big problem for the yen is it was struggling before the conflict,
00:49and now it's having the effect of higher energy prices.
00:52It's net energy importer.
00:54If that keeps the BOJ more cautious in hiking rates, then you get real rates.
00:58They remain negative, and that poses a headwind to the yen.
01:02And also, for the dollar side of the equation,
01:04historically, when an intervention has been successful, you've needed a softer dollar.
01:08You know, we saw that in July 2024, but we're not really in that environment at the moment.
01:13You know, we saw the inflation data yesterday.
01:16And, you know, if the U.S. is to potentially step in with Japan,
01:21that would obviously be of note.
01:23And, you know, it depends on the framing of that,
01:25whether this is a wholesale reappraisal of their dollar policy.
01:29That would be of note.
01:30In terms of, you know, potential oil intervention,
01:33I don't really buy that, to be honest.
01:34I mean, the big problem is, obvious one is the Strait of Hormuz is closed.
01:38Is Japan really going to turn the tide for Brent and, you know, global energy markets?
01:42Probably not.
01:44How do you price in a policy mistake from the ECB?
01:48If they raise rates and the market perceives it to be a policy rate,
01:51do I just sell the euro?
01:52Is it an inverse?
01:53What does the curve look like?
01:54Kind of just talk me through the reaction to what we got from the guard yesterday.
01:58Because the guard's pointing to a rate hike from the ECB.
02:02She's pointing to a rate hike, I think, but not necessarily a series of them.
02:06I think, you know, she was careful to note that longer-term eurozone inflation expectations
02:10are relatively anchored, you know, that five-year, five-year that we spoke about yesterday.
02:15In terms of parallels, people are pretty happy to draw one between now and 2022.
02:19But the real one is 2011.
02:21So we saw the ECB, they hiked rates by, you know, 50 basis points.
02:25And that was, you know, a similar backdrop.
02:27We've had this commodity-led supply-side inflation rise.
02:30And that was kind of what got them to pull the trigger.
02:33And then, as we all know, four months later, they're reversed course and basically back to square one.
02:38And if you look at the German two-year yields over the course of 2011,
02:42we saw this run up similar to what we've seen.
02:44And then we saw this kind of fall off later in the year.
02:46So if you do get a policy mistake, that's probably what you're looking for.
02:51Is the BOE setting itself up for a policy mistake?
02:53I mean, the BOE was definitely a lot less clear yesterday.
02:56You know, I said yesterday we get a lot of this information, which will be good.
02:59But if anything, it did, you know, kind of muddy the waters a little bit.
03:01We've got an incredibly fractured MPC.
03:04We don't know exactly where they stand.
03:06I think the BOE a bit more circumspect.
03:08You know, I think with the scenario B, which they appear to be leaning to,
03:11they definitely see the case for more muted second-round effects.
03:14I think the BOE more cautious and potentially less likely to make a mistake.
03:17So if we do want to make a mistake,
03:17So let's do a break.
03:17I'm not sure.
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