EM FX remains vulnerable to ongoing global trade tensions. It may also suffer from the recalibration of market expectations regarding Fed policy. We remain negative on EM near-term until the outlook for both of these major drivers becomes clearer.
8 Jul 2019
EM is benefiting from the more benign global liquidity story. However, we do not think this is enough to sustain the rally. Global growth and trade remains at risk and so we are cautious about piling into EM right now.
24 Jun 2019
The growth of the GCC debt capital markets in the first decade of this century was reasonably stunted as the region’s need for debt funding was negligible in the face of abundant liquidity ensuing from high oil prices. Due in large part to its sources of revenue and the prevalence of currency pegs, the region’s borrowers have predominately relied on US dollar funding. But as the region’s…
18 Jun 2019
EM FX has gotten some traction lately, but we do not think it will last. While the US-Mexico trade tensions appear to have been addressed, the US-China situation seems likely to drag on into Q3. EM seems to be benefitting from the weak dollar, but the global backdrop remains concerning.
10 Jun 2019
We think the global backdrop remains very negative for EM. Rising tariffs pose significant risks to global growth and trade. We expect both China and Mexico to retaliate further in the coming days. At this point, a potentially more dovish Fed and ECB (amongst many others) is simply not enough to help EM get any traction.
3 Jun 2019
The global backdrop for EM remains challenging. Trade tensions remain high and show no sign of letting up. China PMIs will offer the first snapshot of the economy for May and it won’t be pretty. Lastly, press reports suggest the US will consider allowing tariffs on countries that have undervalued currencies. No good will come of this for EM.
28 May 2019
EM FX had an awful week, with virtually every currency down against the dollar. The lone exception was MYR, which managed to end flat on the week. The divergence theme remains supportive for the dollar, and that should keep downward pressure on EM. We may see some corrective bounces from time to time but we remain negative on EM. FOMC meeting and China PMI readings should help set the tone for…
29 Apr 2019
The dollar rally is back on track as the divergence theme re-emerges. DXY traded last week at its highest level since April 2 and is on track to test that day’s cycle high near 97.71. For EM, that has translated into broad-based losses this past week. ARS, RUB, and a handful of other were able to notch small gains last week, but most EM currencies were down against the greenback. COP, BRL, ZAR,…
23 Apr 2019
The Turkish economy appears to have overcome another perilous stretch of volatility, but in the absence of any structural reforms, and with continued reliance on foreign capital to sustain credit-driven growth, often in synchronisation with the political cycle, long-term prospects will remain hazy at best.
16 Apr 2019
EM FX is coming off a good week, capitalizing on broad-based dollar weakness. Better than expected data out of China helped boost market sentiment too. Key US and China data will come out this week and should help determine the short-term outlook for the dollar.
15 Apr 2019