Archives of “June 26, 2019” day

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EUR/USD forecast to hit 1.1800 – ‘sooner than we think’

  
Analysis, Forex

TD are forecasting EUR/USD to 1.18. Its their year-end target but say the target could be hit “possibly sooner than we expect.”

Say the ECB is dovish, forecast 10bp depo rate cuts in Sep and Dec.
  • And that forward guidance from the bank will stronger
“Our more dovish outlook for the ECB may not be positive driver for the currency, we think the USD will suffer more from the aggressive Fed policy path we expect.”

MSCI upgrades Kuwait to emerging markets status

  
  Analysis

Kuwait has become the latest country to receive the coveted emerging markets status from MSCI, in a move that is expected to result in billions of dollars of investor inflows into the Gulf country’s stocks.

MSCI, the world’s top equity indexing provider, said in a statement late on Tuesday that it would reclassify its MSCI Kuwait Index benchmark to emerging markets status. Kuwait was previously classified as a frontier market.

The upgrade, which comes following MSCI’s latest market classification review, will see nine Kuwaiti blue chips included in MSCI’s emerging markets benchmark from May next year, with an index weighting of 0.5 per cent . MSCI’s emerging markets index is tracked by about $1.9trn in investment funds globally.

The reclassification of Kuwait as an emerging market could see the country’s stock market lure an additional $2.8bn in passive investment flows, according to NBK Capital. In comparison, China’s much larger equity markets is expected to see $125bn in inflows as its presence in the emerging markets benchmark expands.

NBK Capital said that the upgrade for Kuwait could boost liquidity, corporate governance and earnings growth in the Gulf nation’s equity market.

In the year through to May 31, Kuwaiti stocks returned 22 per cent, versus 4 per cent for emerging markets overall. The Gulf bourse’s biggest names include National Bank of Kuwait and global logistics business Agility.

Norway’s wealth fund lifts restrictions on some multinationals

  
  Analysis

Norway’s sovereign wealth fund, the world’s largest, has removed a host of large multinationals from its investment blacklist on ethical grounds.

Norges Bank, which owns an average of 1.4 per cent of every listed company in the world, said it was no longer excluding Walmart, Rio Tinto, General Dynamics, Nutrien and Carlos Slim’s Grupo Carso from its list of available investments.

The move comes as the $1tn investor receives the go-ahead from the Norwegian legislature to dump shares in coal and energy companies.

Norges said it was lifting exclusions on companies that its Council on Ethics decided had changed their ways.

The fund first divested from General Dynamics, the US defence company, in 2005 over its production of cluster bombs, which the company no longer makes.

Retailer Walmart and its Mexican subsidiary were first excluded by Norges in 2006 due to what the council deemed human rights violations. The council said the grounds for exclusion were no longer present. (more…)

Fed’s Bullard – thinks 2 rate cuts by year end would provide a soft landing

  
  Analysis

James Bullard of the Federal Reserve St Louis

  • says he was approached by Trump administration in recent months about possible seat on Fed board, but said he was happy in his current job
  • says part of his preference for a rate reduction in June was tactical, would prefer to move rather than promise a move in the future
  • says he thinks two rate reductions by end of year would ensure a ‘soft landing,’ move policy from slightly restrictive to slightly accommodative
  • says if Fed does cut rates in July, he does not feel a need to also end reduction in the balance sheet since that is already going to end in September
  • US dollar jumps after Bullard dismisses calls for 50 basis point cut, hints at only a single cut

James Bullard of the Federal Reserve St Louis

Goldman Sachs update their gold price forecasts, 3, 6 and 12 months (and on what could take it to $1600)

  
Analysis, Gold / Silver

Gold price projections from Goldman Sachs:

  • 3 months $1450 (prior forecast was at $1350)
  • 6 months $1475 (from $1350)
  • 12 months $1475 (from $1425)

Reasoning from GS:

  • gold supported by central bank buying, GS expect the buying to be more than 100 tonnes over last year’s levels
  • lower real interest rates to support gold

More:

  • base case scenario is global growth gradually improves in H2 of 2019
  • recession worries recede
  • should eventually lead to a gradual moderation in “fear” driven investment demand for gold
  • Emerging market GDP growth gradually improves

GS say they see less tactical upside for gold

  • but weak growth in DM is a positive strategically (portfolio diversification)
  • if slow growth in DM persists, GS expect 2016 to repeat (ETF buying increased by 800 tonnes Jan to Sep that year) – this could take gold prices above $1600

Reuters report that China is to halt all meat imports from Canada

  
  Analysis

Reuters on a media report (Le Journal de Montreal citing an official in the office of the Chinese consul general in Montreal)

China will turn away any “meat products” shipped from Canada starting on Wednesday
  • China said it found a number of fake veterinary health certificates for meat products imported from Canada because of poor supervision
A negative input for CAD
—
The background to this is increasingly tense relations between China and Canada ever since the arrest of the Huawei official (and only daughter of the firm’s founder), Chief Financial Officer Meng Wanzhou.
Reuters on a media report (Le Journal de Montreal citing an official in the office of the Chinese consul general in Montreal)
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