In this edition we highlight:
1. Major Outlook Global Overview: Fed in the Driver’s Seat, but Uncertainties Loom. Our readers may recall that we viewed Q2 as a waiting game for markets searching for drivers. For a variety of reasons, that waiting has likely been extended into Q3 or even Q4.
2. Emerging Market Country Profiles. We have been relentlessly negative on emerging markets (EM) for most of this year. We are turning a little more constructive now but more needs to be seen. The global liquidity story has turned more positive for EM. However, as we’ve seen in the past, this is not enough to sustain an EM rally.
3. Covered Interest Rate Parity – A Law of Nature in Currency Markets? Asset managers dealing in FX forwards should be aware of Covered Interest Rate Parity frictions to ensure that their execution styles align with their clients’ interests. In this piece, we present a framework for examining this new pattern in FX forward markets.
4. Federal Reserve: What They Said. At its June FOMC, the US Federal Reserve left the target for the Fed Funds rate at 2.25-2.50% but signaled that rate cuts are likely by year-end. It is now up to the FOMC to refine the Fed’s messaging. To that end, this piece highlights recent comments from the voting members of the FOMC.
5. Currency Forecasts. Forecasts for major and emerging market currencies through Q2 2020.
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