Give us a sense of why the dollar keeps on strangely today again massive move especially against the yen. How important is the
inflation rate. What are you expecting and how would it move the dial for the Fed. Well no reason to disagree with the consensus
forecast that we're going to be up in headline terms at least from even a half to something closer to 9 percent. I think you
know the details in terms of the breadth of inflation pressures are not just in the core food and energy but maybe some of the
you know the numbers coming out of sight. The Cleveland Fed for example will be important. But you know it's very hard to see
unless we see some really significant downside surprises not just in this week's inflation print but also where we head to
the end of the week and the next. University of Michigan Consumer Sentiment Index. And what happens with that five to 10
year inflation expectations reading. You know big downside surprises I think are a minimum prerequisite for the US dollar
to go to maybe at least pause for breath at least on the upside. But as things stand it's either you know inflation surprises
seeing a ratcheting up in U.S. rates even if other rates are going up supporting the dollar or it's risk sentiment
deteriorating. And you know Mark mentions upcoming corporate earnings. And I also wonder whether the strength of the dollar
given you know the dependence of S&P 500 companies on overseas earnings you know there's more warnings there about that the
headwinds to top line revenue from from the strength of the dollar. So you know whether it's risk sentiment or whether it's
you know further repricing for the Fed we're still struggling to see the conditions for a weaker dollar falling into place
anytime soon. Rea we'll give you a sense that you know we don't see any signs of a slowdown. Particularly we got that jobs
report which was stronger than expected but delayed. That's backward looking. Most state is of course backward looking. The
theme being here how much do you think a recession should be priced into the markets and how much is now.
Well I think there's obviously that difference between what we might find out at the end of the month when there's still a good
chance that Q2 GDP will print negative. And so we will meet that technical definition of recession to two consecutive quarters of
negative growth. But you look at the labor market and there is scant evidence of recession there. And you know we're really
talking about the economic downturn that you know that lies ahead as a result of the lagged impact of the policy tightening
that we're seeing now. And I think that is still a 2023 story of risk markets adequately priced to full blown recession. Well
certainly if you look at the average kind of peak to peak to trough decline in the major US indices in past recessions you'd
have to say no. So I still think the risks are for another you know another lurch lower either because we're pricing in that
recession with more conviction or. And again Mark just mentioned that if we head into next week and there's no sign that you
Russian gas supplies into Europe are going to be accelerating followed the planned end of maintenance.
I think that is also a major potential risk off event that could have global ramifications. And again well it could be the
catalyst for euro heading through below parity if it hasn't reached there already. And that can only mean that dollar
indices will kind of come to a head still higher. All right. Dollar yen at fresh 24 year lows. Of course we had Covid. I say
that he's willing to ease policy even more is needed and that there are great uncertainties out there. How low can dollar yen
go. Well I think the last time I was here a week or two ago which was to be OJ meeting I said that I didn't think we were
heading up to 140 in short order at least. But that was two weeks ago. And I think the combination today of Mr. Kuroda
saying that if we're gonna go anywhere on policy either in terms of the cash rate or the way CFC policy we're going to be easing
policy that certainly seems to play with the grain of dollar. And then we've seen Treasury yields after Friday's rise of
extending those gains in the Tokyo market. So it's a pretty heady combination. So at the moment I think it's pretty hard to
rule out the risk of us moving up to 140. You still think that OJ doesn't have a particular concern about levels here. It's
about speed of moves. So I think there will be perhaps more caution if we do head up on a 138 or 139 handle in the
near-term. But you know for the moment having thought that a correction was due.
Treasury yields have headed back higher. Why. Sisi is locked in for the indefinite future. And on that basis it's you know other
than in the context of a really really big risk off move from here that brings the yen's preeminence safe haven
characteristics back to the back to the floor. It's going to be heart of two to fight this the stronger dollar and trend just at
the moment. Right. The risk of sentiment impacting emerging market currencies. Of course we saw how we're seeing the
weakness in Thai. But just this morning I mean. Any particular currency at risk. Currencies we should be looking out for.
Well if you look across the E.M. spectrum globally not just in Asia. The one anomaly at the moment is the stability of dollar
against the Chinese want. So E.M. is weak across the board. Unsurprisingly given know strengthening US dollar rising US
interest rates it's always a combination that that puts pressure on em. But dollar yen is dollar. Juan sorry has been rock solid.
So you know whether that is on borrowed time or not. You know I couldn't say. It does seem like there must be some flow that is
providing a degree of stability there. But as we go through the year given the latest news on Covid etc. is making it hard to
believe that China is going to come anywhere close to achieving that five and a half percent growth target. If the dollar stays
strong you know our forecast is still that dollar one heads up to between six seventy five and seven in the second half of the
year. No reason to change that view at this stage rate very quickly against European currencies. You're looking at euro. You
think it's inevitable that it goes to parity maybe even below. What about Sterling. Very quickly. Sterling I think is still you
know still got more weakness ahead. Whoever takes over the Conservative Party is gonna be a staunch Brexit. For me the
issue is what's the fate of this this proposed change to the Northern Ireland protocol. If that comes to a head once we got a
new parliament and it looks like it could be approved then we're in for for new bond flight with bunfight with the EU and the
prospect of tariffs and potentially UK EU trade reverting to WTO rules. So I'm still not convinced the Bank of England is going
to do what's priced. So you know we still think there's more weakness ahead for Sterling.