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Currencies

18 Feb 2019   Macro, Currencies, Policy, Global

Brown Brothers Harriman: Emerging Markets Preview for the Week Ahead

Since their post-FOMC peak on January 31, both MSCI EM and MSCI EM FX have fallen. Virtually every EM currency has given up their post-FOMC gains, the lone exception being MYR (+0.2%). The worst performers have been ZAR (-6%), ARS (-3.3%), and TRY (-2.3%). This supports our belief that the liquidity and low US rates story is not enough to sustain the EM rally on its own. What’s still missing is an improved global outlook and we certainly didn’t get that with the US retail sales data.

China: Onshore Bond Index Inclusion Marks Milestone in Financial Liberalisation

The recent announcement that Chinese government bonds (CGBs) and policy bank bonds will be included in the Bloomberg Barclay’s Global Aggregate (Global Agg) Index marks a huge milestone in China’s gradual integration into global markets. Not only does index inclusion herald the beginning of an influx of foreign investment, but it has the potential to mould credit markets across the region.

Brown Brothers Harriman: Emerging Markets Preview for the Week Ahead

EM FX ended the week mixed but gave up much of their post-FOMC gains as the week progressed. MYR, PHP, and MXN were the best EM performers for the week and posted small gains. ZAR, BRL, and ARS were the worst in EM, dropping nearly 2% against USD. US-China trade talks and Chinese data are likely to set the tone for EM this week. Reports that the US government may shut down again should weigh on risk assets.

BBH: EM Preview for the Week Ahead

EM FX ended the week on a soft note as the dollar remains resilient. Very weak EM PMI readings so far in January are very concerning and underscore why we remain negative on EM despite the Fed capitulating to the market and tilting more dovish. Firmer currencies should allow EM central banks that meet this week to keep rates steady.

Safe Enough: Investors Likely to Sit Out Volatility in Traditional Havens

Last year marked the first in decades when global markets ended with a net loss across most asset classes. As the investors begin to earmark potential destinations for their retreat when the time comes to cut their losses and run, they may be hesitant to funnel everything into the historical safe havens such as US Treasuries, developed market sovereigns, and gold.

Burning Down the House: Reserve Currencies and Emerging Markets

Reserve currencies are a kind of macroeconomic insurance, which guarantees access to financing during economic accidents. Reserve currency status can be unknowingly squandered, but it can also be sacrificed deliberately in place of undertaking macroeconomic adjustment. Which path is Trump taking?

Brown Brothers Harriman: Emerging Markets Preview for the Week Ahead

EM FX ended the week on a soft note, as the dollar remains resilient. While a softer US interest rate outlook benefits EM, we think this is offset by the deteriorating global growth outlook. The IMF will release its updated World Economic Outlook Monday, which is likely to highlight the growing downside risks.

Terrafina Maintains Well-Balanced Accounts Ahead of a Volatile 2019

Mexico-based real estate investor Terrafina has grown at a considerable rate over the last five years, supported by a well-balanced business model that ought to help it reap the benefits of the rapid growth of Mexico’s property markets during that same period. But market uncertainty and tough external conditions are pushing the company to adjust its plans, says the company’s CFO Carlos Gomez.

Duet Group: “Frontier Countries Growing in Spite of Governments, Not Because of Them”

In an exclusive interview with Bonds & Loans, Joe Delvaux, Senior Fund Manager at Duet Asset Management, delves into frontier markets, assessing their performance in 2018, providing insight into investor sentiment on broader EM assets, and takes a glimpse into what 2019 might bring.

Brown Brothers Harriman: Emerging Markets Preview for the Week Ahead

EM FX ended the week on a soft note after rallying most of the week on the dovish shift in the Fed’s messaging. Until US rates adjust back to pricing in no US recession, it will be hard for the dollar to maintain much traction and so this EM bounce can continue. Yet other risks to EM remain in place, including slower growth in China and globally.

 

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