France to Underperform as Downgrade Risk Rises

French President Macron has backtracked in the face of increasingly violent protests against his policies. While this may provide a temporary calm, we believe France will remain under pressure as protests continue and the macro backdrop worsens.

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Some Thoughts on US Yield Curve Inversion

A portion of the US yield curve has inverted. While this is not the typical inversion that presages a recession, markets are nevertheless on heightened alert. This piece will discuss the predictive power of an inverted yield curve as well as why we are not yet concerned that one will materialize.

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Some More Thoughts on the Fed’s Neutral Rate

Fed Chairman Powell roiled global markets yesterday in his speech before the New York Economic Club. Upon further consideration, markets may want to rethink the knee-jerk reaction. This piece explains why.

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Where Do We Stand With Regards to the Dollar Rally?

We think that the market is overreacting to two Fed speeches and underreacting to ongoing firmness in the US data. Yes, the US economy is slowing but nothing beyond what was within expectations. Growth, while slowing from the blistering 4.2% SAAR pace in Q2, is still robust.

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Thoughts on the US Elections and Economic Outlook

The mid-term elections in the US are widely regarded as a referendum on President Trump’s first two years in office. While markets have largely priced in a benign outcome, we outline below the tail risks and what they mean for the US economy and global financial markets.

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Stock Market Gyrations Won’t Impact Fed in December

Markets are left wondering if an equity market correction will stay the Fed’s hand in December. The short answer is no. The long answer is that short of a plunge along the lines of 1987 or 2008, Fed policy should not be impacted. This piece attempts to put some historical context behind our call.

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Uridashi Issuance So Far in 2018

Through mid-October 2018, foreign currency Uridashi issuance totaled $7.6 bln. If this pace is sustained, the full year total of $9.6 bln would represent an increase from $8.4 bln in 2017 but would fall short of the $12 bln issued in 2016.

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Some Thoughts on the Upcoming US Treasury FX Report

The US Treasury will soon release its semiannual report to Congress on “Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States.” Speculation has grown that China will be named a currency manipulator, which would be the first time any country has been named since 1994. We do not think China will be named, which would be positive for Chinese assets as well as the wider EM.

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Powell and Brainard Suggest Markets Underestimating Fed Hikes

Recent US economic data and Fed comments suggest markets are vastly underestimating the Fed’s capacity to tighten. While much depends on the US economic performance in 2019, we think US rates are likely to rise more than what markets are expecting. This is dollar-positive and EM-negative, to state the obvious.

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