Daily thread to exchange ideas and to share your thoughts
It's a quieter start to the session as the market looks to digest further the implications of the US CPI report yesterday, although I would argue that it is a rather straightforward one.
The details continue to make it hard to look too much into the high inflation reading (yes, even with a miss the figures are still well above the Fed's 2% target), and that will take many more months to sort through if anything else.
Even if rising cost pressures are abating a little, they are still holding at elevated levels and the ongoing supply disruptions will - expected through to next year - won't help much.
As such, the Fed's taper timeline looks to be on track and that is the key takeaway.
Looking at broader markets, I have a feeling that the mounting risks stemming from China is something that traders will have to be prepared to position for.
I don't see how it ends well and if China were to bail out Evergrande, they would have begun doing so. They still might at the end of the day but not before fears and risks of contagion start to seep into local markets (which it already is) and perhaps abroad.
Adding to that is the slowing recovery conditions and with policymakers promising no more flood-like stimulus as the one last year, it begs the question if the Chinese economy is on the verge of a hard landing.
Perhaps that may be a reason why local authorities are cracking down hard on multiple industries across the economy. Just to double down on any major economic downturn so that the country can have a fresh rebuild moving forward.
That is one area I'm particularly concerned about when viewing risk trades in general and that may risk a bigger meltdown in the coming weeks if this goes unchecked.
What are your views on the market right now? Share your thoughts/ideas with the ForexLive community here.
