Warsh hawkish, but market quick to reverse. Now comes BoJ.

Welcome to the Saxo Market Call. Before we get started, it's important we emphasize that the views and opinions expressed in this podcast are those of the host and guests and do not constitute investment advice or recommendations. All information provided is for educational and entertainment purposes only. Hey everyone, it's Thursday, 17th of September, 2026. A quick one here on the road with very little time. If you hear any extraneous noise in the background, it's hotel staff or people out on the street, so apologies for that. But yeah, we need to have a little bit of an update here, I think, post-FOMC, which of course did manage to surprise on the headlines and in the content relative to certainly what I was expecting from what I was saying on the podcast in the last couple of days. The FOMC did surprise hawkish. They did, of course. There was some residual uncertainty whether they would hike. That was very minor. It was more in the message we're receiving in the staff projections and the accompanying materials where the unemployment rate, for example, was pushed down to 4.1% through this year and the next two years from slightly higher levels, suggesting zero concerns about a very tight labor market. The inflation forecast was nudged up for 2028, interestingly, and that target 2% for the core was pushed out to 2029. And then you saw a small GDP raise for next year. So just that together with a dot plot, which Walsh did emphasize he did not participate in creating the dot plot, of course, of Fed forecasts, showing one more hike this year, though none next year, does suggest the FOMC feels that there's this Goldilocks that they can hike this time and once more. And the economy is going to continue to improve and we'll have this Goldilocks drift down to a core inflation of two. I doubt the reality will shape up quite that way. I suspect either we'll get a recession and maybe inflation stays higher. It doesn't. And or things overheat and require further Fed activity. But that was the content. Walsh also quite hawkish, to say the least, in the presser with phrases like, yeah, we removed a dose of accommodation. You know, a dose of accommodation suggests that, you know, it is. It is still an accommodative policy is the inference there. And what was the quote was that he was hard pressed to describe financial conditions as restrictive. So clearly and then also pushing it back against the idea that the market was telling me he had to hike and there was no choice around that. So, you know, they make the final decision. Interestingly, the market marked up future Fed rate hikes well beyond what the sorry, what the dot plot itself is saying. That's. I guess always been the case, but there was a pretty aggressive sell off and treasuries at the front end of the US. We saw the two year up around seven basis points after sort of dipping quite aggressively into the actual meeting. So a bit of a whiplash, to say the least, for fixed income traders and the long end more well anchored. Of course, the inference there being that the Fed is on the job, they're going to hike until the economy slows enough to prevent inflation from coming out of control. So, you know, we're going to see how the market is. Second, guessing things this morning, a bit we have essentially the 10 year it was up a tiny bit yesterday, it is back decently below 5% the 10 year in the US and we have the yields retreating even to the front end of the curve. I wonder for some sort of pivot here in terms of yields. I think there's decent value in bonds, certainly out the curve a little bit, five to 10 years. But yeah, so the initial reaction, let's see how it weathers in the market. Here, if we look over at the US dollar, it did rally quite strongly. We saw your dollar punching sort of well below that 115 level that is looks pivotal as low as 114.56. And Dalian squeezed all the way up decently above 156, 156.30, in fact, but is now trading this morning down very well below 156. I saw a print a minute ago of 155.60 something. So, you know, it looks like people are using the liquidity to get involved in fresh Dalian short. It's quite interesting that we didn't squeeze, in other words, into the more final resistance, at least not yet of the 157 to 158 area. And let's keep in mind, we do have a Bank of Japan meeting up tonight, and I suggested before, and I do believe this, that the Bank of Japan will modulate its message relative to where Dalian is trading. So I wouldn't expect them to surprise dovish, certainly after this FOMC hawkish blast here. So interesting set up going into that Bank of England today, by the way, to round out these sort of. A macro and FX discussion, not terribly anticipated, they'll be sending their usual shots across the bow is the anticipation on risks of inflation. But clearly, it's the budget dynamics that are going to be critical there. That budget announcement from the UK is not coming until the end of October, which is just ahead of the early November next Bank of England meeting. Yeah, let me look at sort of the risk sentiment picture, which is, I think, clearly being impacted from multiple directions. You would think a hawkish FOMC would be negative for risk. Sentiment, but the and it kind of was, if you look at the median stock out there, the S&P equal weight being the ultimate example. So the S&P 500 equal weight, that is, it was down eight tenths of a percent yesterday, but something like the Nasdaq was essentially flat. Lots of speculation into high momentum names like Lumentum and Coherent as the top two performers in the S&P 500, the SOX semiconductor index up 0.6. So a very, you know, lots of divergences there, not a consistent message. And I think one of the things helping to buoy risk sentiment is the oil price, which has been a key input into these higher interest rates and higher inflation risks in the first place. And we're back off several dollars now, as Saudi is out saying that they can repair at least half of the capacity, they're saying, of this east-west pipeline, which, of course, was completely shut down as their main export outlet into the Yanbu Red Sea facing port, that they can repair half of this or at least half of its capacity in a matter of days. That's good for the oil price. There's also lots of word of various figures being passed around that Hormuz straight traffic is quite a lot more than some of the official registers of that are seeing and is actually delivering a decent amount of crude to market. So it feels like oil wants to be topish. This helps the fixed income side of things, helps the risk sentiment side of things as well. And then over in geopolitics, super interesting to track this whole Canada situation where we have Carney. Out in Europe today, he'll be speaking before the EU Parliament. There's this whole notion that the EU will be accepting Canada as a, quote, associate member, unquote, and all that brings. I need to delve into all the details there. But Trump is already making noise here that this is a very serious business or he says very serious tariffs, as he calls them. And I think there's even talk of seizing whole categories of trade. When I say tariffs, tariffs against the EU. And potentially maybe even embargo on some goods. Very interesting to see how Carney tries to position, you know, is this like the great rebel movement of the middle powers and we're not going to be bullied by by Trump and we have the freedom to do what we want, et cetera. Or is this going to be something that Canada regrets? I lean a little bit towards the latter. They may feel it's necessary because of the existential notion of being bullied around or under the thumb of the U.S. But practically speaking, the Canadian economy is incredibly integrated with the U.S. economy. So that was 930 GMT for the speech and 1030 GMT for a press conference with an EU Parliament or the EU Parliament president. And then actually over, I should have mentioned gold, the gold price in terms of the reaction to the to the FOMC meeting, the sort of the knee jerk thing to expect with the hawkishness would be a gold sell off. It was rallying ahead of the FOMC together with fixed income rallying. And then sold off quite sharply, actually just nudged to a slight new low below 42.50. I think 32.35 was the print and spot gold and then has rallied back at least decently to around 4300. I think that's a pretty decent show of resilience there for gold. So it just feels like flows come in there anytime it's under threat here is proving a very sticky support zone for gold. And if we are reaching some kind of inflection point in yields and they are about to roll over, I wonder if this is an area where gold starts to. Jen up some more interest in in a stickier rally to the upside, which is not it has not managed for for some time after initially lifting off of that big four thousand dollar support area. And then we had a little bit of data, a U.S. retail sales number, fantastically strong print after some prior weakness, much better than expected. A huge surprise, by the way, and I'm being sarcastic to see on the headline that the surge was led by gas stations and online retailers. But the core was very strong as well. But it is a noisy data series. Let's see if I don't know. It doesn't seem like the retail sales is much of a driver. Of course, it means something in aggregate when you look at the mood of the U.S. consumer. But these month to month prints are a bit tricky to to absorb and to do much with. Yeah. And then just one interesting thing on this anthropic slowdown we've been talking about as well. The idea that they need to slow down development before safety concerns, some would argue because they're hoping that the regulator helps to get involved and helps to protect. And some of the others from from competition and that they can slow their spending, I guess, a bit on the frontier rather than in this breakneck spending at all costs to to stay at the at the cutting edge. But just I didn't see the I didn't read the piece, but I saw a headline. Zuckerberg is not in favor of the slowdown, you know, prefers something of what he calls evaluators, whatever that means. So I'll see if I can find that article and post a link to it in the podcast episode description. Together with a deep dive on, this was FT Alphaville putting a link into a substack called Deep Quarry. You know, only the first part of the rather long article is available. If you want to get into the weeds there on what Anthropic is claiming versus what might be the case in the actual accounting and some of the murkier aspects of all this. And speaking of murky aspects, you see how stretched a lot of the financing is for these AI projects. Of course, you have the Amazons and Microsofts and Metas of the world that have very, very deep pockets and have pristine credit ratings because of their incredible profitability and can borrow or set up vehicles, at least, if they're not directly borrowing, to invest in the market. So you have some of the operators at the margin that are still quite sizable. Somebody like CoreWeave, you know, spending tens of billions of dollars on their build-out. Who is going to be scooping them up if the credit ratings go sour, if the slowdown does happen, slowdown in spending, slowdown in data center capacity, etc.? This is not to single them out or any kind of recommendation. They're just a company that shows a lot of stress if you look at their bonds. By the way, if you want to insure those bonds. It's a price of CDS, price of 800, meaning you're paying 8% per year to insure your exposure to CoreWeave bonds for a 2032 bond, which right now, market-to-market trades with around a 12.4% implied yield. You know, a company that's running about a $27 billion negative cash flow for this year on $13 billion, $1.3 billion of revenue. Of course, they're doing this because they believe they're going to build out these enormous data centers. And we'll be running a profit in the financial year 2028. But, you know, they better hope they get there because there's a lot of debt mounting up and creditors are concerned. So, again, this whole race with AI, what is the speed limiter? Is it the debt? Is it the appetite for further build-outs because the profits aren't there, a combination of all of the above? One of the critical things to track for the coming quarters. And, yeah, FT Alphaville also passed. So, passing along, by the way, the price or noting a link to an article saying the price for the top-of-the-line sort of consumer GPU NVIDIA card. So, if you want this sort of top-of-the-line graphics experience with your GPU card and your computer, this 32-gigabyte card runs around $7,500 retail. That's about triple what I used to remember spending for building a decent computer in recent years. It's just really incredible how this is. And, you know, these high prices are penetrating all the way down into the sort of personal computer building space. You know, there's also, of course, been talk of how much Apple is having to spend for some of the components of its phones, memory and otherwise, that are making them so expensive for the next generation for consumers. All right. That about rounds it out for today's podcast. I'm just curious to see how the initial reaction, which is so far kind of unwinding, to the FOMC meeting, both in terms of the immediate feed into Revit.