All eyes are on the Fed and we suspect it will stay true to its message of steady rates until the economic outlook worsens enough to warrant easing. In other words, the Fed is unlikely to be as dovish as the market hopes and so the dollar should benefit. Elsewhere, US-China trade tensions remain high and show no signs of letting up. The backdrop remains EM-negative.
17 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
The credit default swap (CDS) was once widely traded and featured prominently during the global financial crisis of 2008. Although CDS trading has tapered significantly in the years since, the underlying need for liquid risk-hedging tools is unlikely to fade any time soon, and the latest round of regulatory tweaks could help revive this flawed – but necessary – market.
5 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 remains hostage to global trade tensions. Last week’s moves by the US to with regards to Japan, EU, Canada, and Mexico should only be viewed as a change in tactics. China is now the sole focus, but these other trade skirmishes are likely to flare again. We remain negative on EM within this environment.
20 May 2019
With the trade war heating up, we have been getting more questions about yuan policy. Despite renewed US-China tensions being a headwind for the mainland economy, we do not see the yuan being used as a weapon in this trade war.
15 May 2019
EM FX ended last week on a firm note on optimism that a trade deal will be reached. We think that optimism is misplaced and so look for EM weakness to resume this week. Indeed, rhetoric from both sides over the weekend suggest things will get worse before they get better.
13 May 2019
EM FX was whipsawed last week by conflicting Fed views and softer than expected US weekly earnings. We continue to believe that the bar is set very high for a rate cut this year, and that markets have not adjusted accordingly yet. The divergence theme that favors the dollar should come back to the forefront as RBA, RBNZ, and Norges Bank are all likely to deliver dovish holds. Indeed, there are…
7 May 2019
Having exhausted most monetary policy levers, fiscal stimulus appears to be the ultimate go-to solution for lack of growth in the developed world – but it is often very costly, and tends to stand in the way of deeper, much-needed structural reform. Ashmore's Jan Dehn looks at how this dilemma may be resolved.
30 Apr 2019