Dani welcome to daybreak europe. Im kriti gupta in london. Lets get to the top stories. A hawkish skip. The dollar climbed as jay powell signals cuts are not on the horizon. Stocks sold off in the u. S. Session. Prepared to raise rates further if appropriate. We intend to hold policy a restrictive level until we are confident inflation is moving sustainably to our objective. Kriti the knife edge Rate Decision in the u. K. After inflation unexpectedly fell to an 18month low. Central bankpalooza continues. Tottenham hotspur chairman daniel levy is open to selling a stake in the London Football club. Lets get it quick check on markets because it is central bankk this is a howell hangover, if you will. Take a look at futures. Anything can happen as we get more information from the bank of england. Euro stoxx 50 futures down 1 . A lot of that is going to be priced in from pain in the equity market. He saw after chair powells comments yesterday, the idea that we ours ticking to hire for longer even if it means pausing at the top. At the end of the day, we got a hawkish skip, however you want to say it. Futures indicating that as well because a lot of this was priced into the afternoon of the u. S. Session. Overnight, futures continuing to selloff. By the rumor, sell venues. Thats the dynamic in the futures market. It is the winners of the last couple of sessions. That tech outperformance taking the biggest hit. Retracement in play at the moment. That is your stock picture. A quick check across asset as well. The 10year is going to be in focus. 4. 43 is where we are. They are by two basis points. The twoyear yield, the front end unchanged, that has to do with the plumbing in the bond market right now. Eurodollar, the biggest contributor to the dollar move. Weaker by about 0. 3 , 1. 06 right now. Brent crude trading just shy of 93 a barrel. All that will have repercussions for the Asian Session. Lets see how those markets are faring. Avril hong is in singapore with that report. Asian stocks not doing well today on those fed signals of Interest Rates going higher for longer. The Msci Asia Pacific coming under pressure for yet another session. It fell as much as one point 5 earlier, dragged by losses in tech and health care earlier. We also have msci china headed for its lowest close since november and it continue to pessimism about the chinese economy. We are seeing not just stocks affected, were seeing the bleed also in bonds and the currency it is worth noting, that we have some great decisions coming out of Southeast Asia from indonesia and the philippines. A hawkish hold is expected from both of them. No doubt, the currency weakness of late will be weighing on the minds of those central bankers. I want to zoom in on one currency we have been watching closely in the region. The japanese yen, as we await that decision from the bank of japan. There is the expectation that we might see some hawkish surprise from the boj governor. Traders are hanging potentially to any word that will come out on the yen weakness we are seeing of late, especially as it hovers at its lowest level against the greenback in 10 months trade we got comments earlier from the chief cabinet secretary. He says they are not ruling out any option when it comes to curbing excessive moves in the fx. That helped to bring strength back to the japanese yen, but still that weakness is what were monitoring. Kriti avril hong in singapore, we think u. S. Will is thank you as always. Dont worry, we have the boj tomorrow. Time for our top stories of the day. Valerie tytel and lizzy burden keeping count right next to me talking about the central bank story. Valerie, i want to talk about the Federal Reserve. That is the decision of the morning. Lets start with what we actually learned, we knew a hawkish pause was in the cards, what changed . We did get that hawkish pause from powell. Those 2024 dots shifted higher 50 basis points. To answer your question, what changed, the assessment of the economy. They upgraded from modest into solid. But, it didnt come with the fact that this higher growth is going to lead them to hike higher. It came with the underlining that this betterthanexpected growth is only going to allow them to keep rates higher for longer. That is what the dot plot reflected. When it came to his language on this use of this extra height they have penciled in, it wasnt that strong. It led the market to not shift expectations of this hike later in the year. At the front end, it is still pricing about a 50 chance that we get that hike when it comes to the november or december meeting before year end. The front end did move higher. We saw a cycle high for the twoyear note after that dot plot was released. That higher for longer mantra did pressure the front end, but not specifically the risk that powell could have to hike again this year. Kriti what has been factored out from a markets perspective is the cuts story. We will come back to that. I want to bring in the other major story, the boe, lizzy burden all over that. Lets talk about what kind of precedent, for what kind of lead to jay powell has set for andrew bailey. Lizzy you already saw inflation data yesterday pointing maybe towards a hold, which would indicate the boe could follow the fed today, going for that hold. The reason was that inflation was a pleasant surprise, not just at headline level but on a core and services basis as well. You can point to what growth bolstering the case for the doves in the u. K. But the thorn in the side of the boe remains hot wage growth, which is why some on the Monetary Policy committee emphasize that, and may vote for that quarterpoint hike today. The similarity as well with the fed is that markets are still fully pressing one more hike by the end of the year, we dont know whether it will be today. Thats why the guidance will be really important. Kriti is this the bank of englands last potentially . It seems to be for a lot of the other banks are porting today. Bringing it back to the story of ok, this is the ultimate height from the Federal Reserve. If this is in the rearview mirror, window the cuts come about . The dispersion on wall street is interesting. The Market Pricing more cuts, jamie dimon saying we will get more hikes, jay powell somewhere in the middle, where you stand . Valerie powell, when he did talk about this mentioned the fact that the economy is holding up betterthanexpected. The fed is really going to need to see a growth slowdown in order to trust that inflation is falling to their target before they discuss cuts. Before they even change from this hiking bias. They will maintain this bias up until the very end. The thing that will change their mind is a slowdown in growth. Kriti thats whats scary about it. A cut in theory prices in the idea that we will see massive deceleration in the data that happens way faster than expect it. Its kind of a doomsday narrative similar to what is surrounding the language around quantitative tightening. This is where the bank of england has the high ground. The idea that potentially you could see active sales on the bond market. In theory, that sounds scary to me and i am not even in the markets. Should investors be scared by that decision . Lizzy cutie has already been going on in the u. K. There has been 80 billion pounds of sales in the first year. The question is whether they ramp up the pace to 100 billion pounds. The groundwork has been laid, the Deputy Governor has been dropping heavy hints. This announcement today is really expected. What would rock the gilt market is if they ramp up the pace much more than were expecting. We all understand the theory. They want to restock the arsenals in case of another crisis. Kriti it comes down to what the currency impact is here. We are seeing the dollar higher this morning, but is that a positive . Our interest differential still driving the trade. Lizzy, quick take on what the Market Action might look like. Lizzy its going to be volatile whatever happens, both on sterling and gilts. The first half of the year, the pound was boosted by the narrative of higher rates, now maybe we see the peak of Table Mountain the second half of the year and what growth, perhaps not so much, but its difficult because we are on a nyfix. Kriti im just now learning that knife edge is a term here. Bloombergs Valerie Tytel and lizzy burden walking us through the two major Central Banks are porting but we have a ton of other ones on the docket. You can get a full roundup of what you need to know in todays edition of daybreak, including the bank of england and the Federal Reserve, plus, poland cutting arms supplies to ukraine. All of that on your terminal, just type in dayb and you will get all that right on your screen. Coming up, it is decision day for turkey as well. Economists forecasting a 500 basis point hike. We look ahead to what we can expect from the governor. This is not bloomberg just yet. We have one more interview to promote. We hear from Tottenham Hotspur chairman daniel leavy on whether he is open to selling a stake. He gives us hints on the future of harry kane. That exclusive interview is later this hour. This is bloomberg. Kriti ill come back. This is daybreak europe, im kriti gupta in london. Among our slew of Central Bank Decisions, we expect to hear from the south African Reserve bank. We dont put a ton of emphasis on what the sarb is doing but a chart came to mind. When i first started covering emerging markets in the fx trade , there was a popular trade, it was basically this esau effect between seesaw effect between the turkish lira and south african rand. Fastforward six years later, you see that the south african rand has seen extreme weakness coming from higher water and electricity prices, power cuts, not to mention extreme inflation. Inflation that is much worse than it is in some of the other developed economies around the world. When i put this chart in front of you showing just how weak the turkish lira is by comparison, it speaks to the fact just how much worse things are in turkey. Thats where i want to go next. We will get that update from south africa and also an update around midday london time from turkey. Bloomberg expecting a jumbo hike, doing little to stop inflation from surging higher. Joining us for more on the direction of turkeys Monetary Policy is our reporter in istanbul. A pleasure to have you on the show, turkey is a complicated story. You have seen liquidity fall off the map for a lot of assets. Talk to us about a 500 basis point hike today. How effective might that be . The overall consensus today is that the Turkish Central Bank will raise rates by 500 basis points. Inflation is running at nearly 60 annually, and has yet to peak. Policymakers see it peaking next year second quarter. Even with the 30 rate hike, that leaves real rates when adjusted for inflation well below 0 . The bank says it is going to curb demand, tightening Monetary Policy through backdoor steps as well to increase the effectiveness of monetary tightening. And were likely to see more tightening steps in the coming months. Kriti at the same time, you have the fiscal policy working its magic, at least in theory. The finance minister in new york right now trying to convince investors that his policy steps are going to work out. It is similar to what you are seeing in china, trying to bring investors back to the country. How is that going to pan out . For simsek and the new economic team, swaying investors is a number one priority to fix the external financing needs and bring them back. Tackling inflation is the number one priority. That is what simek said to investors. Today we will see if this have full bank is determined, or if the policymakers are determined enough to show that with a sharp rate hike. Simsek has also prioritized budget discipline that had taken a toll from february earthquakes, as well as elections spending in the runup to the may election, where president erdogan got reelected. So, budget discipline, Monetary Policy discipline are all priorities and key messages simsek told investors in his trip to new york this week. Kriti take turkey seriously. That is the message both from the monetary and fiscal side. Lets talk about when a terry policy. Governor erkan when she took over the Turkish Central Bank, in new york, there was a lot of questions of how you go from leading one of the major real estate Underwriting Companies in new york to the head of Turkish Central Bank policy. How much independence as she actually have at the helm . In july, during a presentation, governor erkan was asked a very similar question. She firmly set the central bank is independent in its policymaking. But there is still speculation over president erdogans influence on Monetary Policy. Up until recently, investors look at erdogans remarks for clues on what the Economic Policy will look like. Erkan recently appeared to endorse the steps simsek are taking, that was a key message delivered to investors in new york, that erdogan was fully on board with the policies which is important. We have seen in the past, erdogan removing Central Bank Governors for not taking a dovish stance. He is not a fan of higher Interest Rates. His go to policy up until now has been growth at all costs, even if it came at the expense of price stability. There are local elections slated for may. There are still concerns that erdogan may take a step back and return to championing cultural loose Monetary Policy ultra loose Monetary Policy. So far, erdogan is behind all the steps they are taking to rein in inflation. Kriti a playbook that a lot of World Leaders to varying degrees of success have tried. Beril joining us from istanbul. Here is what we are watching in markets ahead. At 8 30 u. K. Time, the Swiss National bank will deliver its latest Rate Decision. Most economists seeing a increase to 2 . Likely the snb final hike. In london, at noon, it is the boes turn. The unexcited drop in inflation has given the central bank plenty to digest. Is it going to hike . The jury is still out. In the u. S. At 1 30 p. M. A slew of Economic Data starting with jobless claims create an then existing home sales. Is the Housing Market a bigger deal to worry about them the labor market . Saudi arabia, in the meantime, getting closer every day to a landmark deal normalizing diplomatic relations with israel. Also the words of Saudi Crown Prince mohammad bin salman. He spoke to fox news. The policy issue is very important. We need to solve that part paid we had good negotiations continued until now. We have to see where we go. We hope that it will ease the life of the palestinians and get israel back as a player in the middle east. It seems for the first time serious. We see how it goes. Kriti yousef gamal eldin joining us now. Your take on mbss interview . There are historic ships in the geopolitical calculus in the region. This interview is timed to leverage that major shift. Its very significant. It is the first time we have seen him speak english in public in a very long time. He doesnt give a lot of interviews. It took place along the red sea close to neyo. You have to see pictures to understand what neom is meant to be. It is a futuristic city unlike anything ever seen before and speaks to the ambition saudi arabia has. It is halfway toward the vision 2030, as they try to diversify from oil. This is not a diversification project, this is a transformation project. The saudis have shown they are willing to work on sensitive issues. Complex negotiations underway with the u. S. And israel would see washington offer security guarantees to riyadh, the saudis would normalize relations with israel, and israel would take actions to preserve the possibility of a palestinian state. He spoke about the possibility of iran getting a Nuclear Weapon saying if they get one, we get one as well. Diplomatic ties or back into play. They have restored ambassadors. The focus for saudi arabia is to allow the kingdom to be a layer beyond crude oil. As a result, that means saudi first in a lot of domestic and international thinking. That means u. S. Foreign policy is not always front and center in terms of what decisions they make. Kriti really interesting take, because you talk about diplomacy, when i think mbs and fox news, i immediately think about how close he was with former president donald trump. Especially when it came to oil. He talked about that, what did he say . He underscored that this is not about helping russia out. Even though russia and saudi arabia ci to i within opec , he made the point that the saudis voted against russia when it came to the United Nations motion on the ukraine war. At the end of the day, his take was it is all about supply and demand, echoing what his family relative the Saudi Energy Minister keeps saying every couple of weeks. That they are looking at the data and making decisions on that basis. The extension of the saudi cuts to the year end of a Million Barrels per day will raise flags of concern in a market that is already restricted. Goldman sachs talking about 100 a barrel by year end, up from 93 a barrel. We are all left thinking about whether there are any bigger geopolitical strokes that are being played behind the scenes to make the most of this oil power in the soft equation out there. Kriti a complete game changer for the entire worl