Japan

The rebound in growth is pushing up inflation. More aggressive monetary policy is likely to trigger recession over the next 12 months or so. Investors should stay defensive.

Great Power Rivalry is taking another leg up as Russia and China further align their geopolitical interests. Investors should stay long USD-CNY, favor defensives over cyclicals, and markets like North America and DM Europe that have less exposure to geopolitical risk. 

The risk of a recession in 2023 is being supplanted by the risk of another inflation wave. We will turn more defensive on equities if it continues to look like inflation is making a comeback.

This week, we articulate what the actions of the three major central banks that met (Fed, ECB and BoE) mean for currency markets. This is within the context of our analysis of the latest data releases in the G10, that allows us to calibrate currency strategy.

When does rising unemployment become a bigger problem than inflation? The Fed won't cut rates until that happens, probably thwarting market hopes of big cuts in 2H.