Latest / Bloomberg Intelligence / Chapdelaine's Borthwick Sees USD/JPY at 95 in Next Month(Audio)

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Chapdelaine's Borthwick Sees USD/JPY at 95 in Next Month(Audio) · Bloomberg Intelligence

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  Speaker 1: I'm Charlie Pelton. Dat's some Bloomberg business flash. This is
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  Speaker 1: taking stock with Kathleen Hayes and Pim Fox on Bloomberg Radio.
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  Speaker 1: Central Banks and focuses data that the Reserve started it's
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  Speaker 1: two day policy meeting. No rate hike expected at the
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  Speaker 1: end of that meeting, however, maybe some signals that they
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  Speaker 1: could be in the future. Meanwhile, the Bank of Japan
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  Speaker 1: starts it's to day policy meeting on Thursday. By right,
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  Speaker 1: it is expected to announce some more stimulus. The question
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  Speaker 1: now is how much. Meanwhile, the yen surging the most
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  Speaker 1: is Britain voted to leave the European Unions as traders
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  Speaker 1: scaled back expectations for further aggressive monetary and physical stimulus
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  Speaker 1: before UH. They meet later this week at the Bank
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  Speaker 1: of Japan. Joining US now to put it all together
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  Speaker 1: for US is Doug worth Quick. He's managing director, head
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  Speaker 1: of f X Foreign Exchange at Chapter Lane and Co. Doug,
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  Speaker 1: welcome back, Thank you very much. So first of all,
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  Speaker 1: you know what's interesting? Um? In an interview, UH did Dan?
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  Speaker 1: I believe it was Bloomberview contributing Muhammaduarrian was talking about
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  Speaker 1: how the maybe the markets too complacent about the FED
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  Speaker 1: raising rates once maybe even twice this year, and he
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  Speaker 1: also mentioned how he thought that right now that you're
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  Speaker 1: not going to see the volatility around central banks so
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  Speaker 1: much in stocks and bonds. The currency market is where
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  Speaker 1: we're going to be seeing all the big movers. I
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  Speaker 1: think it's correct there. I think that you're you're seeing
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  Speaker 1: central banks involved pretty much across the board, and that's
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  Speaker 1: really pushing down in volatility right now. But the currency
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  Speaker 1: markets still have a little bit of freedom, is still
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  Speaker 1: not as much as we'd expect. Doli En certainly is
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  Speaker 1: trading up and down based upon the expectations for guidance,
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  Speaker 1: and the Japanese press has certainly been fueling this fire,
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  Speaker 1: with the NICK saying that fiscal spending would double to
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  Speaker 1: six trillion yen at the same time overnight. Yet Taro Aso,
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  Speaker 1: the Finance Minister, coming out and saying regarding fiscal stimulus,
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  Speaker 1: we've yet to decide on the size of the economic stimulus.
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  Speaker 1: So the market here's one thing, gets excited, buys doll
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  Speaker 1: an here's something else, and then sells off again. At
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  Speaker 1: the same time, as you said, we've bet a b
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  Speaker 1: o J two day metings starting on Thursday ending on Friday,
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  Speaker 1: there's a question of whether to expand montrely stimulus. Further,
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  Speaker 1: I think that that actually maybe unlikely. I think what
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  Speaker 1: maybe more likely is on Friday we'll find out they
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  Speaker 1: start talking about forward guidance for the first time, and
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  Speaker 1: that means maybe talking about maintaining the size of their
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  Speaker 1: balance sheet going forward, which would give people some comfort,
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  Speaker 1: and staying long dollar yen at that time being. But
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  Speaker 1: then again, I think that any sort of position right
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  Speaker 1: now long dollar yen is sort of like pushing on
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  Speaker 1: a string. Given I believe there are other actors right
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  Speaker 1: now that are selling dollars buying end that would include
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  Speaker 1: central banks like like China, Dog Borthwick. What's long term
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  Speaker 1: in the mind of a currency trader, but that the
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  Speaker 1: bands long term normally is you get in the one
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  Speaker 1: spot and you get a long term once you once
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  Speaker 1: it goes your way. So if I'm right with Dolly,
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  Speaker 1: and like the last time I think we had a discussion,
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  Speaker 1: I said, we go through a hundred. Obviously we dipped
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  Speaker 1: down past that hundred level after the Brexit. Certainly that
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  Speaker 1: long term and I've been taking profits around that time.
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  Speaker 1: I think nowadays, if I have to think long term here,
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  Speaker 1: and I'm thinking maybe we could go up to one
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  Speaker 1: ten on some sort of surprise, and at the same time,
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  Speaker 1: I think it much more likely to go down to
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  Speaker 1: I'd say that's within the next month or so. Okay.
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  Speaker 1: The reason I asked that is because I'm wondering whether
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  Speaker 1: moves in currency markets are leading or lagging indicators for
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  Speaker 1: investors that may not be in currency markets but are
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  Speaker 1: in bonds and stocks. Well, I think you can think
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  Speaker 1: of currency markets as being sort of the tip of
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  Speaker 1: the spear, and the currency markets when a piece of
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  Speaker 1: news comes out or we see something hitting the tapes,
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  Speaker 1: people would trade the currency first because it could be
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  Speaker 1: that the equity market is closed or the bond market
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  Speaker 1: is closed, but the currency markets are always open, as
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  Speaker 1: you know, and so I think that certainly there is
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  Speaker 1: a little a bit of a leap there in that respect.
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  Speaker 1: But also people when they buy the currencyre they sell
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  Speaker 1: the currency. You find that macro investors get on board
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  Speaker 1: on that before they start thinking about what to do
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  Speaker 1: with the currency once they bought it or so that's
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  Speaker 1: a very important question then for the Bank of England
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  Speaker 1: and uh, you know, to get into the weeds here
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  Speaker 1: a bit, but it's it's big news today. Bank of
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  Speaker 1: England policymaker Martin wheel who had been somewhat you know,
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  Speaker 1: dragging his feet on immediate and big interest rate cuts
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  Speaker 1: in in the UK, now say he favors immediate stimulus
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  Speaker 1: for the UK economy. Recent indicators on manufacturing looking much
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  Speaker 1: worse than he was looking. So you've got the pound
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  Speaker 1: hit by that, and then weak economic data in the
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  Speaker 1: US kind of moving the pound in the other direction.
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  Speaker 1: If it's the pounds a tip of the spear for
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  Speaker 1: people looking at those UK markets, what's what's the takeaway now.
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  Speaker 1: I think that the Sterling as soon as that happened.
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  Speaker 1: I think the most market participants believe that there would
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  Speaker 1: be a rate cut coming forward. I think there's a
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  Speaker 1: little bit of a surprise that they didn't cut last month,
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  Speaker 1: but certainly August fourth that looks like they'll cut from
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  Speaker 1: zero point five percent to around I think that's certainly
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  Speaker 1: an expectation. I think that's already priced into Sterling. I
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  Speaker 1: think if anything, what Sterling has done over the past
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  Speaker 1: week is or the past couple of weeks since Brexit
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  Speaker 1: is it's it's it's managed to find a foundation or
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  Speaker 1: a floor, and people have realized that this isn't going
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  Speaker 1: to be a full blown Brexit, but it's looking more
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  Speaker 1: like Brexit light. And I think that with with materials
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  Speaker 1: Amain there, I think that what you're gonna find out
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  Speaker 1: is you're gonna find out that she actually starts pushing
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  Speaker 1: things down in the line. They won't trigger Article fifty
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  Speaker 1: until the end of the year at least. I think
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  Speaker 1: before that you're going to find some sort of stabilization
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  Speaker 1: in Sterling. And maybe I pushed back up to that
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  Speaker 1: one for two level because people understand that it's not
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  Speaker 1: going to be quite as catastrophic as everyone was expecting.
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  Speaker 1: Dog Bothwick, just quickly, dollar Euro currently one oh nine,
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  Speaker 1: give you about twenty seconds. Well, I think the year
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  Speaker 1: at all with this one or nine level is still
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  Speaker 1: very much below it's fair value. I believe that there
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  Speaker 1: are buyers of the year dollars that are moving their
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  Speaker 1: reserves into the euro and out of the dollar. I
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  Speaker 1: think that we're have an expectation to see run one
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  Speaker 1: fifteen certainly by the end of the year. And even
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  Speaker 1: though you see the basis moving out in the euro.
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  Speaker 1: The last time we were at these levels in the
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  Speaker 1: three year basis wall the euros at one twenty. Thanks
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  Speaker 1: very much, Douglas Borthwick, Managing director ahead of FX at Chaplin,
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  Speaker 1: Dame and Company. Right now Euro at one oh nine
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  Speaker 1: versus the dollar, pounds, sterling one one and the Japanese
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  Speaker 1: gen trades at one oh four sixty two. This is
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