What Has Changed in EM

  • China announced retaliatory tariffs on $75 bln of US goods
  • Bank Indonesia delivered a dovish surprise and cut rates 25 bp to 5.5%
  • Japan-Korea relations continue to deteriorate
  • Turkey’s central bank loosened policy by easing reserve requirements
  • South Africa government will announce plans to reduce debt and spending at its mid-term budget review in October
  • Argentina Economy Minister Dujovne resigned last weekend
  • Brazil plans to accelerate the sale of state-owned assets Continue reading “What Has Changed in EM”
Dollar Mixed Ahead of FOMC Decision

Dollar Firm Ahead of Powell’s Jackson Hole Speech

  • The annual Fed symposium in Jackson Hole takes center stage
  • Powell will stick with his “mid-cycle adjustment” view; several Fed regional presidents are reluctant to cut rates again
  • The G-7 leaders meet this weekend in France; any sort of strong G-7 communique is unlikely
  • The ECB released a very dovish account of the last policy meeting; Japan reported July national CPI
  • USD/CNY made a new high for this move above 7.10; Singapore July CPI rose 0.4% y/y; Frontier central banks are easing Continue reading “Dollar Firm Ahead of Powell’s Jackson Hole Speech”

Dollar Firm Ahead of Jackson Hole

  • FOMC minutes were not as dovish as many had hoped; bond and equity markets are set up for a big reset
  • Today sees the start of the annual Fed symposium in Jackson Hole; the US reports a slew of data
  • Markit flash eurozone August PMI readings were reported; ECB publishes the account of its July 25 meeting
  • Japan-Korea relations continue to deteriorate 
  • Indonesia delivered a dovish surprise; Mexico and Brazil report mid-August inflation data Continue reading “Dollar Firm Ahead of Jackson Hole”

DM Equity Allocation Model For Q3 2019

We recently introduced our Developed Markets (DM) Equity Allocation model. Building on the success of our EM model, this new framework extends our analysis to cover 24 DM equity markets. Our analysis is meant to assist global equity investors in assessing relative sovereign risk and optimal asset allocation across countries within the DM universe. Continue reading “DM Equity Allocation Model For Q3 2019”

Dollar Firm as Markets Await Fresh Drivers

  • President Trump confirmed that he is exploring tax cuts; our base case scenario for no US recession remains
  • FOMC minutes will be released; despite all the uncertainty in the US, we remain dollar bulls
  • Markets shrugged to news that Italian Prime Minister Conte resigned; Canada reports July CPI
  • Japan reported weak July supermarket and department store sales; Korea reported weak trade data for the first 20 days of August
  • South Africa July CPI is expected to rise 4.3% y/y Continue reading “Dollar Firm as Markets Await Fresh Drivers”

UK Brexit Scenarios Narrowing

The odds of a hard Brexit are getting alarmingly high. Here, we set forth some possible scenarios as to what may unfold ahead of the October 31 deadline. The most likely outcomes are not good and so we see UK assets continuing to underperform. Continue reading “UK Brexit Scenarios Narrowing”

Dollar Extends Gains

  • The dollar continues to climb; during this quiet period, some Fed officials are still talking
  • Press reports suggest the Trump administration is mulling the notion of a payroll tax cut
  • UK Prime Minister Johnson will travel to Germany and France this week; he is floating a possible alternative to the Irish backstop
  • China introduced a major reform to its monetary policy framework; RBA minutes were released
  • EM FX continues to get crushed; TRY is underperforming after yesterday’s easing measures by the central bank Continue reading “Dollar Extends Gains”

Turkish Policymakers Flirting With Disaster

Turkey’s central bank just loosened policy by easing some reserve requirements. Coming ahead of the policy meeting September 12, the move suggests the bank will cut aggressively then. Confidence in policymaking remains low even as the economy is mired in recession, and so we expect Turkish assets to continue underperforming. Continue reading “Turkish Policymakers Flirting With Disaster”

Thoughts on the Fed Ahead of Its Jackson Hole Symposium

There has been a noticeable lack of verbal guidance from Fed officials since the July 31 FOMC meeting. That makes FOMC minutes Wednesday and the Jackson Hole Symposium starting Thursday even more important. That said, we do not think the Fed will paint itself into another corner given continued firmness in the US data. Continue reading “Thoughts on the Fed Ahead of Its Jackson Hole Symposium”