There is full-blown panic setting in as the economic collapse is accelerating.

Panic In Global Currency Markets
July 12 (King World News) – Peter Boockvar:  There is of course going to be a lot of focus on these sharp FX moves and its impact on corporate profits but I want to highlight that what should also be paid attention to is to what extent company floating rate debt has cost them. Now just as some companies hedge out their FX exposure, many hedge their floating rate position via swaps or even replace it with fixed but others don’t and that is going to cost them. In Pepsi’s earnings release today, they said the stronger dollar cost them 200 bps on after tax earnings per share.

They also said this, “we are unable to reconcile our full year projected 2022 organic revenue growth to our full year projected 2022 reported net revenue growth because we are unable to predict the 2022 impact of foreign exchange due to the unpredictability of future changes in foreign exchange rates” and other things. Looking at their income statement there was little change in interest expense so Pepsi at least protected themselves from the sharp rise in rates y/o/y.

For perspective on the euro by the way, the average exchange rate vs the dollar since it was introduced in 1990 is $1.20.

Yesterday the NY Fed said its median one year inflation expectations survey saw an increase to 6.8% in June vs 6.6% in May and that is a new cycle and series high. With the response being an aggressive Fed, expectations for 3 yr inflation expectations fell to 3.6% from 3.9%. With the sharp rise in mortgage rates, expectations for home price gains are slipping to 4.4% one year out vs 5.8% last month. That’s the slowest since February 2021 and it is a cooling that the housing market needs.

Worries grew for the labor market as the “mean probability that the US unemployment rate will be higher one year from now increased by 1.8 percentage points to 40.4%, its highest level since April 2020.” Income growth expectations ticked up and spending expectations fell…more here