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Thomas Harr, PhD, Global Head of FI&C Research, Danske Bank, offers his thoughts on the global slowdown and its likely impact on the financial markets, in its latest research report.

Key Quotes:

“For some time I have held the view that the USD will do well due to carry and US outperformance.

The trade war itself should be US dollar-positive, but if at some point it triggers a response from the Fed, I believe USD strength will be over, particularly versus cyclical, risk-sensitive currencies such as the NOK, AUD and NZD.

The markets are pricing central banks very dovishly and inflation expectations in the US and the Eurozone are at very depressed levels. I view the current dovish pricing of the central banks and inflation expectations as fair given the weakening global outlook and downside risks.

I expect US and core-euro interest rates to remain at current low levels for the time being, with the risk tilted to the downside for US rates.

Finally, I expect global equity markets to head lower given the weakening global outlook. “