Goldman Sachs has lowered its forecast for oil demand growth this year

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Goldman Joins Wall Street Chorus Warning About Possible U.S. FX Intervention

© Reuters.  Goldman Joins Wall Street Chorus Warning About Possible U.S. FX Intervention © Reuters. Goldman Joins Wall Street Chorus Warning About Possible U.S. FX Intervention

(Bloomberg) — The buzz around possible U.S. currency intervention is growing louder as Goldman Sachs Group Inc (NYSE:). has now weighed in on an idea that’s been making the rounds on Wall Street.

President Donald Trump’s repeated complaints out other countries’ foreign-exchange practices have “brought U.S. currency policy back into the forefront for investors,” strategist Michael Cahill wrote in a note Thursday. Against a fraught trade backdrop that’s created the perception that “anything is possible,” the risk of the U.S. acting to cheapen the dollar is climbing, he said.

The U.S. last intervened in FX markets in 2011 when it stepped in along with international peers after the yen soared in the wake of that year’s devastating earthquake in Japan. That effort buoyed the dollar. However, more analysts in recent weeks have been contemplating the wild-card notion that the U.S. could forcibly weaken the dollar. The U.S. hasn’t taken that step since 2000.

“Direct FX intervention by the U.S. is a low but rising risk,” Cahill wrote. “While this would cut against the norms of recent decades, developed-market central banks have recently used their balance sheets more actively, and FX intervention is akin to unconventional monetary policy.”

Growing Ranks

Goldman joins analysts from banks such as ING and Citigroup Inc (NYSE:). in writing on the prospect. Intervention has become a hot topic since Trump tweeted last week that Europe and China are playing a “big currency manipulation game.” He called on the U.S. to “MATCH, or continue being the dummies.”

Buoyed in part by a round of Federal Reserve rate increases, the dollar has strengthened against many of its peers. A Fed trade-weighted measure of the greenback isn’t far below the strongest since 2002, underscoring the competitive headwinds American exports face overseas. Trump has grown concerned that the currency’s strength will undermine his economic agenda, which has also fed into his criticism of the U.S. central bank.

There may be some wrinkles to consider with intervention, Cahill wrote. While the Treasury and Fed have typically contributed equal amounts in past episodes, if the Fed chooses not to participate it would “substantially limit” the potential scale, he said. Treasury’s Exchange Stabilization Fund holds roughly $ 22 billion in greenbacks and around $ 50 billion in special drawing rights that it could convert.

To be sure, even if the Treasury acted on its own, “we would expect that the symbolic importance of this step would still have a significant market-moving effect,” he wrote.

Trade Backdrop

That’s not to say it’ll be easy to leave a lasting impact on a market that trades about $ 5 trillion daily. In past interventions, various nations’ central banks typically acted together, strengthening the signal to investors. But this time, the U.S. may find itself flying solo, especially if its efforts would work to the detriment of American allies as trade tensions simmer.

“The international community would be unlikely at this stage to coordinate with the U.S. to weaken the dollar,” Cahill said.

The market has yet to display much concern about the prospect of U.S. intervention: Global currency volatility is at a five-year low. However, the risk of Trump moving beyond words to achieve a weaker greenback would increase if the European Central Bank pursues further monetary stimulus, according to ING.

“Could frustration with the Fed prompt the President to take matters in his own hands and weaken the dollar?” ING’s Chris Turner and Francesco Pesole wrote in a note Monday. Though the U.S. last month reaffirmed a Group-of-20 commitment to refrain from competitive devaluation, “the lure of a weaker dollar to support the U.S. economy into 2020 may be too great.”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Goldman Sachs says to short Chinese yuan ahead of the G20 meeting next week

GS note CNH, and other Asian currencies, strength approaching the G20 meeting next week (June 28 and 29), and are looking to short CNH.

Citing that even if there is some sort of easing in trade tensions at the G20 they will not disappear entirely:

  • likely to “ebb and flow”
  • still see additional tariffs as “more likely than not”

GS also say yen looks attractive still (Fed rate cuts, signs of slower US economic growth to chip away at USD strength). 

Yuan had a good one last week, following the PBOC holding it fairly steady since mid-May  despite market expectations it would fall:

GS note CNH, andother Asian currencies, strength approaching the G20 meeting next week (June 28and 29), and are looking to short CNH.

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Goldman Sachs cuts 2Q GDP tracker to 1.5% from 1.6%

Lowers GDP estimate for 2Q growth

Goldman Sachs has cut its second-quarter GDP tracker to 1.5% from 1.6%.  That is still above the Atlanta Fed GDPNow estimate at 1.2%. The Atlanta Fed will update their GDP tracker tomorrow.  

The NY Fed will also update their GDP estimate tomorrow. Last week, there estimate came in at 1.8% down from 2.2% in the previous week.

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Goldman Sachs: UK is likely to leave EU with modified version of current withdrawal agreement

The firm maintains their view on the way Brexit will play out

Brexit
  • The politics of Brexit have become more protracted
  • As a result, the side-effects on Brexit on the UK economy have intensified
  • Capex by businesses have been particularly subdued

All you have to know here is that sentiment remains that a no-deal Brexit is still seen as unlikely for the time being. As for a deal, we’ve been at this crossroads for many a time now over the past few months. Until something gets done, it’s more likely there will be another extension than there will be a Brexit deal that the UK parliament can get behind.

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Goldman Pushes Back Fed Hike Forecast to 4Q 2020 From 1Q 2020

(Bloomberg) — Economists at Goldman Sachs Group Inc (NYSE:). have pushed back their forecast for the Federal Reserve to raise interest rates amid low inflation and political scrutiny of the central bank’s decisions.

The U.S. bank now expects the Fed to hike in the fourth quarter of 2020 from the first quarter.

The shift comes even as the bank lifted its U.S. gross domestic product forecast to 2.5 percent in the second half of 2019 and 2.25 percent in the first half of 2020.

“But the inflation numbers have surprised to the downside even as the goalposts for the next rate hike have shifted higher with the FOMC’s emphasis on muted inflation pressures and review of its policy framework,” Goldman economists including Jan Hatzius and David Mericle wrote in the note. “Coupled with an increase in political scrutiny of monetary policy decisions, this has lowered the odds of a hike before next year’s presidential election.”

Still, the better growth outlook means the U.S. bank added a second rate hike in 2021 to its forecast.

“We expect the FOMC to adopt average inflation targeting next year, at least implicitly raising the inflation target to a level we expect to reach but not surpass,” the Goldman economists wrote. “But amidst normal U.S. business cycle expansion conditions of above-trend growth, continued labor market tightening, and ongoing easing in financial conditions, we think that the FOMC is likely to resume at least a very gradual pace of tightening.”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Apple, Goldman Sachs send Wall Street tumbling

© Reuters. Traders work on the floor at the New York Stock Exchange (NYSE) in New York City © Reuters. Traders work on the floor at the New York Stock Exchange (NYSE) in New York City

By April Joyner

NEW YORK (Reuters) – Wall Street’s major indexes tumbled on Monday as shares of Apple Inc (O:) and Goldman Sachs Group Inc (N:) dragged down the technology and financial sectors.

With Monday’s losses, all three indexes erased the gains from their brief rally after the U.S. congressional elections on Nov. 6.

Apple shares fell 5.0 percent after several suppliers to the company, including Lumentum Holdings Inc (O:), whose components power the iPhone’s Face ID technology, cut their forecasts. Apple’s decline impeded the tech-heavy Nasdaq, which fell more than 2 percent.

Lumentum shares plunged 33.0 percent. Shares of several chipmakers that sell to Apple, such as Cirrus Logic Inc (O:), Qorvo Inc (O:) and Skyworks Solutions Inc (O:), dropped as well. The Philadelphia SE Semiconductor index () dropped 4.4 percent.

"The concerns are all about global economic growth, specifically demands for the products of companies like Apple," said Kate Warne, investment strategist at Edward Jones in St. Louis. "Investors are becoming more concerned about faster-growing companies and whether they will continue to grow at that pace."

Goldman Sachs shares dropped 7.5 percent after Bloomberg reported that Malaysian Finance Minister Lim Guan Eng said the country was seeking a full refund of all the fees it paid to the Wall Street bank for arranging billions of dollars of deals for troubled state fund 1MDB. Goldman Sachs was the biggest drag on the Dow, which fell more than 2 percent.

Among the S&P 500’s 11 major sectors, technology and financial stocks weighed most heavily. The S&P 500 technology sector index () fell 3.5 percent, and the financial sector index () fell 2.0 percent.

Energy stocks () also accelerated their decline toward the end of the session as oil prices fell.

"At the moment it seems the path of least resistance is down," said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.

The Dow Jones Industrial Average () fell 602.12 points, or 2.32 percent, to 25,387.18, the S&P 500 () lost 54.79 points, or 1.97 percent, to 2,726.22 and the Nasdaq Composite () dropped 206.03 points, or 2.78 percent, to 7,200.87.

A holiday in the U.S. bond markets for Veterans Day kept trading volume muted. Volume on U.S. exchanges was 7.30 billion shares, compared with the 8.41 billion average over the last 20 trading days.

General Electric Co (N:) shares fell 6.9 percent after Chief Executive Officer Larry Culp said the company was saddled with too much debt and would urgently sell assets to reduce leverage. The shares dropped below $ 8 for the first time since March 2009.

Declining issues outnumbered advancing ones on the NYSE by a 2.80-to-1 ratio; on Nasdaq, a 3.64-to-1 ratio favored decliners.

The S&P 500 posted 29 new 52-week highs and 10 new lows; the Nasdaq Composite recorded 25 new highs and 161 new lows.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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