We're continuing to see all these price pressures and that's being exacerbated by what you're seeing in the oil market how
much of this is a concern at the moment. Of course when we're continuing to see recessionary fears too. Well absolutely. It is
a problem for the market because in the past we always have basically central banks bailing us out. And this time around we
don't have basically the central banks. Inflation may be topping but that still needs in the short term. We need to normalize
monetary policy. So you see ongoing interest rate increase across the board. And I think that just adds to a picture higher
rates elevated inflation and slowing growth. And that's obviously a challenge for markets. We also had this pretty dire
warning coming through from Jamie Diamond that we're preparing for some kind of hurricane economic storm. Are you that dire.
You bracing here. No not looking for a recession. But I think what we need to think about is a slowdown. I think what we need
to watch out for is while the US slows in Europe we need to look for a little bit of a bounce in China. Obviously a lot of
uncertainty but we still think there is a bounce coming as mobility restrictions are being eased. So I think that could
help particularly a. And I think some of the reopening here in the region is not fully through. So I'm quite positive still
when it comes to Asia in a global context. Dominic it gives a sense of you know with the Russian oil being
sanctioned of course some of it will make its way to other parts of the world.
How does that figure into OPEC's sinking. Because on the one hand they probably like prices where they are. And so that
perhaps on the second on the other side that is make them more reluctant to increase output.
No I think what OPIC plus wants to do is continue to increase output. I think there is a certain limit where they feel
comfortable with higher prices as demand destruction comes in. But we saw far haven't seen that kind of weakness on demand. I
mean a lot of people still want to travel and I think that keeps demand for oil off. We are going into probably still a strong
driving season. We expect China to come back as well. Keep in mind we probably at one point lost more than 2 million barrels
in demand. That's coming back. So I think they're in a very good spot. Increasing production but that comes on the back of
falling spare capacity. And that doesn't mean even if you increase supply you might still see a high price because pay
basically the market becomes quite nervous about you know reduce spare capacity in the market. So look at prices north of hundred
and fifty dollars per barrel of any talk about Brent. Yeah. How far.
Because oil is and other commodities are priced in dollars. How far has that been lending support to the USD.
Well the US runs a big off current account deficit and I think with ample petrodollars in their coffers I think definitely
supports a well bet dollar. I would say the U.S. dollar on the other side.
I think it's not the main story but definitely one. Keep also in mind that higher energy prices is a burden for Europe.
It has already led to a massive deterioration in the trade the balance for example or also when it comes to Japan and the US in
terms of energy is a net exporter of energy. So from their end it's either a redistribution within the US but overall it's a
plus for the dollar. So clearly supportive for a strong dollar in the short run support for a strong dollar. What are you
looking at when it comes to the on and off shore you on particularly amidst China's Covid policies and the impact there.
If this continues we know that they don't really seem to be giving up on on Covid 0. So I think given the uncertainty on
growth and if there's a short run I wouldn't be surprised. And the stronger dollar that we had towards six point nine somewhere
there about. But then we should level off. I mean there is no need for it to see in my two week and systematically. I mean we
still have a decent current account surplus. We do have attractive real yields maybe not anymore nominal. And I think
that should still help. So once the growth uncertainty is gone. Dollar CNY is probably a stabilizing candidate but we're not
there yet. And I would hedge the risk at this point in time. Now of course yield differentials are one thing but a yield
curve I suppose turning around and inverting is the subject of our question of the day which is how long before the yield curve
fully inverts. Or will it. Dominic. Not necessarily. I think what could happen actually as you take
liquidity away from the market. We talked about basically we Kutty I think you're going to see basically the long and still
being well a bit higher. So I wouldn't be surprised. At some point we move again above 3 percent. We might not stay there for
a long period of time so we might still have a positively sloped yield curve. It will get flatter that's for sure. I mean
depending how you look at two to 10 is already obviously pretty flat. But if you look at the three months to 10 year which we
normally look at that shouldn't invert. And so I wouldn't look for that kind of recession signal that people look at. We're
going to not going to grow as fast as in the past. But that's part of the game plan. If we also to ask you out NY poll
question of the week because we're looking at Q2 beginning and the unwind there of that balance sheet and how that's factored
into markets the biggest pain point you see here for markets as we begin quantitative tightening after so much easy liquidity.
Well there is also less demand for liquidity. I think we need to keep that in mind. So I don't see so much of an impact in the
short term. But a one point maybe one of the weaker points could be the high yield market. I mean you know once the liquidity
goes out the economy slows. What could what does it mean for basically high yield spread. It's maybe one of the risk factors
you want to think about at this point in time. I mean we still have a neutral view on us high yield. But I think once that
element the clarity is gone I think definitely a high yield pro for example looks a little bit more attractive.