Interesting upcoming week Micro
OBE is now in Q4. This is the high growth quarter of 2022 - from start to finish
Macro
A large part of decline in oil price has been caused by the strength in USD
Increased US fed rates caused increase in USD
When short term interest rates increase short term bond prices decline. That means investors short short term bonds and no one wants to buy them. This makes the short term bond market illiquid.
Last week we saw the first breaks in the UK and Japanese financial markets - with central bank intervention as a result
This means the US fed may not be able to raise interest rates further without risking financial markets breaking - ie the ice started cracking last week. When that happens you stop and listen
This means the US fed is likely to pause further interest rates. They may also do a Twist (buy short term bonds to provide the missing liquidity at the short end). Sell long term bonds to reduce money supply and raise interest rates at the long end
If the US fed pauses rate increases then the USD declines and oil prices increase
If the US fed buys short term bonds to correct the illiquidity issue, then short term interest rates decline and fed will pause its interest rate increases
The probability that the fed will pause interest rate increases is now high
This means the lows in WTI were set last week
ALSO
It looks like OPEC is going to announce a significant cut in its quota on Wednesday.
A cut in oil supply and a weaken in the USD means two strong reasons for WTI to increase
This May be sufficient to remove the divergence between the paper and physical oil market price
It May be a very interesting week indeed