FX Quarterly for Third Quarter 2017

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In this edition we highlight:

  • Five themes for quarter three – ECB and Fed policy, an analysis of the Fed’s composition, key political events on the horizon, and what it all means for currency markets.
  • A landscape of Emerging Market countries that has to be navigated carefully, with an eye toward strong economic fundamentals and low political risks.
  • Masashi Murata also offers an overview of Emerging Market countries.
  • Currency Forecasts and an analysis of productivity and wage growth.

Read the full Q3 2017 FX Quarterly.

From the Securities Lending Trading Desk

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Bullish sentiment for U.S. assets leads to increased IPO activity. In Asia, one of Japan’s largest car airbag manufacturers filed for bankruptcy on Monday. China’s domestic equities will join MSCI’s benchmark indexes, marking a landmark step in the continued integration of the nation with the global financial system. The Finnish construction company, Yit Oyj has sought to acquire Lemminkainen Oyj as it bids to increase its footprint in northern Europe.

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Drivers for the Week Ahead

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  • The US, Japan, and the Eurozone all report their preferred inflation measure in the days ahead
  • Two of Italy’s banks become the second and third banks in the EMU to be subject to the supervisory authority of the ECB
  • If the Senate cannot pass a healthcare reform bill, it will raise more doubts about the broader economic legislative agenda

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Dollar Pares Gains Ahead of the Weekend

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  • Flash manufacturing PMI for Japan and flash PMIs for the Eurozone had little impact on the capital markets.
  • In the US, politics is eclipsing economics in the week after the FOMC hiked the Fed Funds target
  • Markit reports the flash PMIs for the US today, and the government reports existing home sales; three Fed officials speak ahead of the weekend.
  • Brazil mid-June IPCA inflation is expected to rise 3.48% y/y vs. 3.77% in mid-May

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Greenback Goes Nowhere Quickly, While Yen Remains Bid

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  • The summer doldrums begin early; fresh market moving news remains light
  • Canada reports April retail sales
  • Federal Reserve Governor Powell speaks before the Senate Banking Committee shortly after the US equity market opens
  • The central banks of New Zealand and Norway left rates on hold
  • Philippine and Taiwan central banks kept rates steady, as expected; Brazil central bank will release its quarterly inflation report; Banxico expected to hike rates 25 bp

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From the Securities Lending Trading Desk

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As Sears Holdings’ struggles continue, we are seeing increased bearish sentiment for companies with exposure to the retailer, specifically REIT, Seritage Growth Properties.  Borrowers are seeking shares of Toshiba Corp after plans to sell its memory-chip business took an unexpected turn last week.  In Europe, capital raising deals are driving securities lending demand. Continue reading

Officials Fill Vacuum of Data to Drive FX Market

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  • The light economic calendar has cleared the field to allow officials to clarify their positions  
  • The Bank of England Governor was clear in stating that there is no need for a hike now 
  • The minutes from the Reserve Bank of Australia’s recent meeting were released today 
  • South Africa Q1 current account was larger than expected; Hungary central bank is expected to keep rates steady at 0.9% but could cut the cap on 3-month deposits 

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