• [Dallas Fed President Kaplan (with voting rights in 2020): If not necessary, I hope to cut interest rates cautiously] Support the FOMC rate cut in July. It is expected that US GDP will increase by 2% in 2019, but the downside risks to such expectations are slightly more prominent. It will be open to whether the Fed needs further action, and does not want the Fed to follow other central banks to cut interest rates.
• [Fed Patrick Hacker: It is not expected to cut interest rates again] It is necessary to adopt measures suitable for the United States, and cannot ignore the global environment. We are currently in a better position than the target. I am reluctant to cut interest rates. Do not agree with the words of insurance interest rate cuts. The current economic growth rate is in line with what we expected last year. It is very difficult for me to consider negative interest rates, and I do not think that further stimulus measures are needed. The Fed’s policy is at a neutral level.
• [Italian President gives major political parties more time to negotiate new government formation] Italian President Mattarella said he would allow political parties to complete negotiations on the potential for a new government next Tuesday. Mattarella said that the crisis should be ended as soon as possible, and the government must get the support of the parliament, otherwise it will need to hold new elections.
• [US National Economic Adviser Kudlow: The currency and bond markets are expected to have a 25-point cut in the Fed.] There may be tax cuts before the US election in 2020. Short-term payroll tax cuts are unlikely, but personal tax rates may be lower. May reduce the capital to obtain tax rate. Optimistic about the economic situation.
Summary of investment bank views
Bank of America Merrill Lynch: Although the euro is undervalued by about 10% against the US dollar, the exchange rate is expected to fall to 1.08 at the end of the year.
Bank of America Merrill Lynch released a research report saying that even if the exchange rate is undervalued, the euro may fall to 1.10 at the end of the third quarter, and may even drop to a low of 1.08 at the end of the year. Although the euro is undervalued by about 10%, we still see that the euro still has more downside before the end of the year, the US economy remains strong, while the euro zone economy continues to weaken.
It is expected that the European Central Bank will cut interest rates this fall, and may even re-introduce QE, and I also suspect that the Fed may not cut interest rates as expected by the market. Trade tensions remain grim, and we are also concerned about trade negotiations between the EU and the United States. On the other hand, Italy will face a double political and fiscal crisis this fall. In addition, no agreement on Brexit will further drag down the economic development of the euro zone.
TD Bank: Although the model predicts that the US dollar against the Canadian dollar will fall below 1.32, it is still expected to return to above 1.33.
Toronto Domingo Bank (TD) released a research report on Thursday (August 22) that, unlike the model's estimated 1.32, the bank believes that the US dollar against the Canadian dollar is expected to return above the 1.33 mark. We believe the USD/CAD is expected to return above the 1.33 mark, although our HFFV model believes the pair should trade slightly below 1.32. We are more willing to pay attention to the market's statement to the Bank of Canada's senior officials at this week's central bank meeting. However, considering that the Bank of Canada's argument has been very flat since the July policy meeting, this week may not be too big.
UOB: The Australian dollar is consolidated in the 100-point range for 2 consecutive weeks. It is necessary to break through this interval to determine the next trend.
UOB researched and discussed the technical prospects of the Australian dollar against the US dollar and maintained a tactical neutral bias. It is expected that the Australian dollar will be consolidated horizontally and the long-term consolidation (the Australian dollar has been sideways in the 100-point range for more than two weeks). The momentum indicator is neutral, and the prospect of continued rebound is not high; in other words, unless the Australian dollar breaks above the 0.6730/0.6845 range, the Australian dollar may continue to move sideways over a period of time.