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20 Aug 2018   Macro, Currencies, Global

Brown Brothers Harriman: Emerging Markets Preview for the Week Ahead

EM FX stabilized last week as the situation in Turkey calmed somewhat. Reports Friday that the US and China are hoping to resolve the trade dispute also helped EM FX ahead of the weekend. However, TRY remains vulnerable as the US threatens more sanctions due to the pastor. Both S&P and Moody’s downgraded it ahead of the weekend and our own ratings model points to further downgrades ahead. Turkish markets are closed this week for holiday.

A US-China Trade Dispute May Be Good for Latin America

Latin America may have more to gain than lose in a U.S.-China trade dispute, so long as it does not spiral into a recession-provoking trade war, writes John Price.

Brown Brothers Harriman: Emerging Markets Preview for the Week Ahead

EM FX has come under pressure again due to ongoing trade tensions and rising US rates, but saw some modest relief Friday after the PBOC announcement on FX forwards. This helped EM FX stabilize, but we do not think the negative fundamental backdrop has changed. Best performers last week were MXN, PHP, and PEN while the worst were TRY, ZAR, and KRW.

A LIBORious Transition: Weaning the World off the Most Popular Credit Benchmark

About a year has passed since the UK FCA’s Chief Executive Andrew Bailey set the deadline for the financial markets’ transition away from LIBOR, upon which roughly USD350tn in securities, loans and derivatives across five major currencies is contracted. Finding an alternative that can satisfy the diversity of markets that rest upon this crucial benchmark is proving to be more elusive than anticipated, beckoning questions about the pace and scale of transition.

Brown Brothers Harriman: Emerging Markets Preview for the Week Ahead

EM FX enjoyed a respite from the ongoing selling pressures, with most currencies up on the week vs. the dollar. Best performers were CLP, MXN, and ZAR while the worst were TRY, CNY, and COP. BOJ, Fed, and BOE meetings this week may pose some risks to EM FX.

Brown Brothers Harriman: Emerging Markets Preview for the Week Ahead

EM FX saw some violent swings last week, due in large part to some unhelpful official comments. BRL and TRY were the best performers last week, while RUB and CLP were the worst. When all is said and done, however, we think Fed policy remains unaffected and so we remain negative on EM FX. Also, global trade tensions remain high after Trump threatened tariffs on all Chinese imports entering the US.

The Coming US Recession Triggers: What You Need to Know

There are many potential triggers or combination of triggers that investors monitor – increasingly now given where we are in the current cycle – to try to predict when the next recession will arrive. It is hard to pinpoint specific causes historically aside, perhaps, from catastrophic policy (fiscal or monetary) mistakes or unanticipated global economic shocks. The reality is that many of the potential triggers themselves are inter-related and can result from a recession rather than indicate that a recession is imminent.

Central Banks, Sovereign Investors Change Tack on Investing in EM

Sovereign assets and central bank reserves are increasingly finding their way into alternatives and emerging market assets in a bid to boost returns, according to an Invesco survey of 126 sovereign funds and 65 central banks that sheds light on how asset allocations have shifted in recent years.

EM Bond Outlook: Better 2H 2018 Expected

It has been a tough start to the year for emerging market bonds, but things are looking up as we head into 2H 2018 – you just need to know where to look.

Trump’s Trade War with China: Impact on EM FX and Rates

US President Donald Trump unilaterally started the trade war with China and he shows no signs of letting up. His policies on trade mark a major departure from America’s long-standing commitment to free markets. The combination of protectionist measures and fiscal profligacy is likely to further increase the challenges faced by American companies in their quest to compete internationally by pushing up the real effective exchange rate.

 

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