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IGM_Monthly_Interest_Rate_Outlook_-_July_2018.pdf

Please find attached the July 2018 edition of the IGM Monthly Interest Rate Outlook.

Highlights:

The synchronised global economic growth story has it seems gone off piste. The US economy continues to outperform � this provides cover for the Fed to maintain its tightening path. Where the Fed goes, many other, mainly Emerging Market, central banks feel little choice other than to follow. Still, Senior Analyst Anil Mayre writes the changes in the world of central banking have led to UK issuers increasing Dollar securitisation sales. [Pages 2-5]. This even as fears of Usd scarcity intensify.

  • Elsewhere, the ECB has eliminated any idea of a rate hike in the near-term, as European Fixed Income Manager Alvin Baker writes 'by guiding steady rates policy until September 2019, or even longer still, barring a surprise leap in inflation to above the levels that the June Staff Forecasts predict'. [Pages 6, 8-9]
  • At the BoC,Senior FX Analyst notes 'We wrote in last month's MIRO that only a significant weakening in Canadian data would postpone a July increase in rates from the BoC of 25bps to 1.5%, but last week's surprisingly disappointing retail sales and tepid inflation numbers have reduced the implied probability of a July increase down to around 50%.', and then there is the impact of tariffs � [Pages 6, 11]
  • � which means that global economic bell weather South Korea needs watching. In this context, FX Analyst Freda Yeo's point takes on extra significance, 'The Bank stated its intention to revisit economic growth forecasts at the July 12 convene as the outlook gets increasingly clouded by the deepening China/US feud.' [Pages 7, 16].
  • Elsewhere, Emerging Markets Managing Analyst Chris Shiells highlights, 'the NBH finally admitted that the current loose policy conditions cannot be maintained until the end of the 5-8 quarter policy horizon, marking the beginning of the end of its dovish stance.' [Pages 7, 12].

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