From the Securities Lending Trading Desk

In the US, amid a heavy focus on on technology and semiconductor sectors, we have seen an uptick in fundamental interest for connected chip maker, Impinj, Inc. (PI). As dark clouds continue to gather over brick-and-mortar retailers, one of Australia’s leading firms in the sector has seen some signs of improvement as it shifts its strategy towards online sales. In Europe, H&M, a long term popular borrow name, opened up 19% this week, the most in 17 years following unexpected sales growth and reports that owners are exploring privatization.

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Dollar Marks Time Ahead of FOMC

  • The dollar is trading largely sideways as the two-day FOMC meeting begins today
  • Press reports suggest that Italy will present a compromise budget deficit equal to -1.9% of GDP for 2019
  • Reports suggest that UK opposition Labour Party would consider holding a second Brexit referendum in order to avoid a hard Brexit
  • Brazil COPOM minutes will be released today, while the quarterly inflation report will be released Thursday

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Drivers for the Week Ahead

  • The FOMC meets Wednesday and is widely expected to hike rates 25 bp
  • Trade tensions will remain high
  •  EU-UK Brexit deal remains far, far away
  • The drama in Italy continues
  • Germany, EU, and Japan all report CPI data
  • Several more EM central banks take center stage; most will be hiking rates

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EM Preview for the Week Ahead

EM FX ended Friday mixed, but capped off a generally firmer week as a whole. We think the EM-negative drivers remain in play: rising US interest rates and heightened trade tensions. FOMC meeting will be the key event this week, but the response to the implementation of US and Chinese tariffs will be a close second.

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What Has Changed in EM

  • China reportedly plans to enact broad tariff cuts
  • China will be able to sell bills in Hong Kong
  • Bank Indonesia plans to offer IDR-settled NDFs domestically
  • A second North Korea-US summit may be in the works.
  • Hungary central bank is laying the groundwork for exiting unorthodox policies
  • South African Reserve Bank tilted more hawkish
  • South Africa will redirect ZAR50 bln of spending as part of a plan to boost growth and create jobs
  • The Turkish government announced a plan to help support the banking sector, but details were lacking
  • Argentina is trying to increase its IMF program to as much as $70 bln from $50 bln currently
  • Brazil COPOM tilted more hawkish whilst leaving rates steady at 6.5

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Dollar Gets Modest Traction Ahead of the Weekend

  • The Italian drama continues
  • Eurozone reported weaker than expected flash PMI readings for September
  • Reports suggest China will enact broad tariff cuts
  • Japan reported August nationwide CPI
  • Brazil mid-September IPCA inflation is expected to rise 4.36% y/y

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Sterling Pops, Dollar Fizzles

  • The dollar cannot get much traction despite developments that are typically supportive
  • UK reported strong August retail sales
  • Swiss National Bank kept policy steady, as expected
  • Norges Bank hiked rates 25 bp to 0.75%, as expected; future rate path was slightly more dovish
  • Brazil COPOM left rates steady at 6.5%, as expected; SARB is expected to keep rates steady at 6.5%

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Dollar Soft Even as US Rates Rise and Trade Tensions Mount

  • US rates continue to march higher
  • Meanwhile, trade tensions continue to ratchet up
  • UK reported higher than expected August CPI
  • Yen weakness continues in the wake of the BOJ decision overnight
  • Bank of Thailand kept rates steady at 1.5%, as expected; Brazil COPOM is expected to keep rates steady at 6.5%

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Brazil Central Bank Preview

Brazil’s COPOM meets tomorrow and is expected to keep rates steady at 6.5%. The tightening cycle should begin in October, but much will depend on the real and how it trades around next month’s elections. Volatility is likely to remain high and tied to opinion poll results.

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