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Bank of America Leaves Key Forecasts Unchanged

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(Kitco News) -Amidst a backdrop of trade war tensions, Brexit worries, and lower interest rates around the world, Bank of America Merrill Lynch is keeping their U.S. 10-year bond yield forecast at 2.00%, according to a note released by the bank today.

“We have not made shifts to our core US 10yr interest rate forecasts, with an expectation for the US10yr at 2.00% at the end of the year,” the report said.

Additionally, key FX rate forecasts in the developed markets remain unchanged.

“We do not make any forecast changes in G10 FX. We continue to look for broad USD weakening, as we see the dollar generally overvalued. Our year-end target for EUR-USD remains 1.17, and for USD-JPY stays at 101,” analysts said in the report.

Elsewhere in the world, small revisions were made in FX forecasts for emerging markets.

“Since last month, we make a small upward change to our near-term USD-CNY Q3 forecast but keep our year-end target at 6.63. We also revise our USD-INR profile, looking for 68 at the end of the year,” the report said.

BoAML remains “constructive” on the BRL on the back of the overall economic agenda, while the bank is bearish on the MXN given a “negative balance of risks.”

Other emerging markets currencies were given less positive ratings.

“We are cautious ARS, neutral PEN & CLP, and bearish COP,” the report said.

BoAML said that in the Eastern Europe, Middle East, and Africa regions, geopolitical tensions remain on center stage.

“After the recent Ukrainian election, clarity on policy direction will be critical for the country's future. Elsewhere relations between Turkey and the US remain in focus, whilst Iran tensions are set to remain high,” the bank noted.

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