So just touching on what Kathleen said there about the Bank of England. I mean how do you kind of play that. You shot the
pound. Yeah I think. Look the central banks at the moment it's a really interesting play because Jerome Powell surprised us all
with a little bit of a dovish pivot in a way. And then we've seen the other Fed members coming out trying to water that down
a little bit to say look you know we still are going to see material rate hikes going forward at least for the rest of the
year. And they are still primarily focused on inflation and
particularly core inflation which continues to remain pretty elevated almost everywhere as you pointed out. I think though
it's interesting you bring the RBA into this where Governor Lowe actually described this really well. Clearly central banks are
trying to now and we shouldn't dismiss what your own pal said last week.
Central banks are very clearly trying to navigate that soft landing that they've all been talking about. So while talking
about the inflation pressures you look at somewhere like Australia where headline inflation is still accelerating and is
expected to accelerate. The central bank revised up their inflation expectations and that data will be released in all of
its detail tomorrow but clearly focused on unemployment.
And it's interesting that Governor Lowe talked about how he didn't want to give up the gains that were made during the Covid
stimulus on bringing unemployment down and beginning to lift wages. So clearly these central banks and I expect the Bank of
England will be similar and it will be interesting to see whether they bring about this sort of pseudo dovish pivot as
well where they start to talk about what happens after the rate hikes.
And I think that's going to be key today for the Bank of England. Given all of those that you just mentioned then how
does that play that into your convictions in the currency market. It's very much like it's still a dollar story here.
Absolutely. And so from our perspective we still have a 98 target for the euro dollar for example. So dipping below parity
remaining pretty strong into the end of the year largely as more because we think real interest rates which have come down a
little bit of late in the US which did put up a bit of pressure on gold as well for example brought the dollar a little bit
softer. We think the dollar begins to strengthen again into the end of the year before we get that peak dollar environment. I
guess the same with respect to the pound. We actually like to be long the US dollar short the pound in that context just because
we think that the economic situation in the US particularly with respect to energy prices and so forth it isn't the same set of
issues that are being faced in the UK in Europe. And so when I mean what effect is quantitative tightening have on all of this.
I mean we've seen such a huge amount of liquidity in the system. As you look at M1 going up from about 4 trillion dollars over 20
trillion dollars in March 2020 and the tapering process going on right now not tapering but actually what we have them coming in
selling bonds. I mean surely this is going to play out with the dollar in terms of a headwind.
Look I think that you raise a really interesting point. The Russian and the Kuti in a way is like a pseudo rate hike in that
context. So when Jerome Powell made those statements last week it was almost a little bit like they're trying to navigate as
well. The path of rate hikes relative to the pace of duty. And certainly one thing with respect to Kuti is given the rally
we've seen in Latin yields for example that you would expect to see a bit of a pushback on that. And we actually think that 10
year yields by the time we get to the fourth quarter should be back around the 3 per cent for example in the US. So this is
also going to play out as we talked about at the top of the show with respect to the Bank of England. So the Kuti is going to
accelerate. They are going to potentially start to sell bonds into the market. That is going to push upward pressure on the
longer into the yield curve potentially again. So we actually might see even though we're seeing rate hikes and we've seen
this sort of lift to the front end and the rally in the back end what we
actually might see is the back end starting to rally a little bit again as well. So this will complicate the matter with
respect to the US dollar. But nonetheless in the short term we think that it can still not undermine the dollar so much with
respect to the dollar is going to continue to focus on growth in the US being relatively robust unemployment being very low and
the payrolls number on Friday is going to be very important to continue to drill down that narrative. You know we're continuing
to see whether or not this supply demand issue is going to be fixed out with around 90 dollars a barrel. Have we reached peak
oil here. I think to be fair we actually think that oil prices go materially higher from here. In fact we have 125 dollars a
barrel on Brent by the end of the year. Now the reasons for that are really interesting. So at the moment the concerns about the
demand side are well and truly entrenched in the market. Hence the reason oil is step back recently and actually over the last
couple of months. But the increase that we got from the news we got from OPEC last night is really telling to how much spare
capacity is actually left in the global system. And to be fair we haven't seen a material supply side response from US shale
producers for example which traditionally happened in the past which then caused supply to be rising at a faster rate than
demand this time round. Well I think clearly telling us they are very worried about the spare capacity side
away. And I mean we had almost a shale is a swing production part of the whole oil complex. Why is that not the case anymore.
I think that to be fair ish I think the overall globally investment in oil production and oil facilities has been running
at a very low pace for a very long time. The interesting thing about the OPEC announcement overnight was that even though it
was 100000 barrels when you when you spill it down to how does that apply to the different members. Actually it was only an
increase of around 30 to 40000 barrels. Right. So largely because the UAE and Saudi Arabia are the only ones with really
any spare capacity to lift production from here. Clearly they are concerned about particularly respect to domestic consumption
there but also on a global basis. The issues are or the war in Ukraine has also reduced oil investment also in Russia. And so
consequently over the next 18 months let's not even think about the next few weeks over the next 18 months as oil demand we
think remains positive at around one and a half million barrels per day growth over the next two years. Even with the global
slowdown we still see the market either finely balanced or in deficit. And remember that obesity inventories are at very low
levels. So even with a bit of softness today because of all the concerns around global growth looking forward we still think oil
prices can hold well and truly around or above that hundred dollars a barrel. Looking out over the next couple of years
Wayne let's talk a bit about crack spreads. And if we get additional supply out of the likes of Saudi. Is it the right
type of oil. And what about Iran in order to get a viewer question saying that Iran is coming back with two and a half
million barrels a day as well. Look I think the Iran question is always on the table. And up
till now we haven't seen a lot of movement on that. The negotiations between the West and Iran and off since the
Ukraine war we actually haven't heard any real dialogue about it at all. The point is about Iran is that yes they could bring two
and a half million barrels per day direct to the market. But in reality they've been continuing to export about one to one and a
half million barrels per day. If you follow the tanker tracker data. So even if they were to come back and in fact we actually
need Iranian crude on the market come mid next year. Otherwise oil deficit will get even larger. So I would argue that if we
don't have that Iranian oil come back we could easily see prices around that 120 to 130 dollars barrel almost at a time when it
is very quickly wanting to get your views on what we're saying with a war in Ukraine and whether very much impacting
agricultural commodities here. Yeah look we have seen encouragingly we have seen some shipments coming out of the
Ukraine only one shipment actually so far. I would have expected to see more that will begin to calm nerves particularly in those
key importing countries in Africa as well as in the Middle East who are very reliant on the Ukraine and also Russia to that
degree. Russia will probably have almost a record wheat crop this year. So getting as much wheat out as possible is
incredibly important particularly for food prices. But weather conditions in the US and the crop in the US for corn and
soybeans is still under a question mark because it was planted so late. And let's not forget La Nina is likely to return for
another year. And we know that can put weather risks in the Latin American crop. So we are not past the weather risk part of
the equation yet even though we've seen a bit more grain market.