The Week Ahead

Volume 123 - DeepSeek is the Temu ChatGPT

Last week, I opened with this: “I’m positioned for further strength, targeting >6100 with a real possibility of fresh all-time highs.” Fast forward, and we hit the mark. It wasn’t just a technical breakout, it was further confirmation that this bull market might have more fuel in the tank than you imagined. Fast-forward to Sunday and we are down 50 handles on ES1 because of “DeepSeek”.

Heading into another pivotal week, my view remains unchanged for now.

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Bank of Japan: 25bps hike

• What Happened… The BoJ raised its benchmark policy rate by 25 basis points to 0.5%. This marks a significant escalation in their normalisation efforts as inflation continues to exceed their 2% target. It follows their July 2024 rate hike, making clear that the BoJ is now firmly shifting away from its ultra-loose stance​ just in their own fashion.

• What’s Next:
  Possibility of further hikes should inflation remain sticky. Markets are pricing in more tightening through 2025, with another hike potentially coming by mid-year. This will continue to support yen “strength” but as mentioned previously rate differential between US and Japan is still wide and if the Fed push back on easing then the carry trade should continue to perform.

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FOMC - not much to comment on