21 June 2017
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FED

Political issues are also demanding greater attention but despite these concerns equity and fixed income markets remain resilient.

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By Emirates NBD Research

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The middle of the year sees the market focus turning to central bank policy decisions with the Fed continuing to raise interest rates this month. Political issues are also demanding greater attention, especially in the US and the UK, but despite these concerns equity and fixed income markets remain resilient.    

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  • Global macro: Summer brings with it an opportunity for financial markets to pause and take stock of where things stand in the middle of the year.  Although US interest rates were raised this month, what was expected to be a ‘dovish tightening’ turned into one a ‘hawkish’ one as the Fed stuck to its forecast for another hike this year and for more rises to come in 2018 and 2019.
  • GCC macro: OPEC’s decision at the end of May to extend the production cuts agreed in November 2016 has triggered growth downgrades across the GCC.
  • Non-GCC macro: Egypt’s foreign exchange position continued to strengthen in recent weeks, enabling the central bank to lift restrictions on foreign exchange transfers which had been in place since 2011.
  • Sector Focus: An overview of Dubai’s wholesale and retail trade sector.
  • Currencies: Having being in a downtrend since early May, the USD has been showing some encouraging signs of stabilization since early June. To be fair this has happened before in 2017, only for its rallies to peter out and be overwhelmed by the larger downtrend that has been in place since January. That decline since the start of the year has corresponded with the fall in bond yields, which few if any in the market anticipated would happen in the context of a tightening Fed.
  • Equities: Global equity markets remain unfazed by political risk and a more hakwish Fed although some complacency among investors appears to be settling in.
  • Commodities: MENA energy demand slowed in 2016 but was still the fastest growing region globally. Energy demand is dominated by natural gas and oil with the UAE showing a considerable natural gas deficit. 

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Written By

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Emirates NBD Research Research Analyst


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