Argentine Markets Still Suffering Despite Bold Actions

Argentine central bank surprised markets with a 500 bp hike in the policy rate yesterday. It is clear that an aggressive orthodox policy response is a necessary but not sufficient condition for stabilizing a nation’s financial markets. We warned back in May that regardless of the measures taken, Argentina is likely to remain under pressure within the context of a broad-based EM sell-off. Continue reading “Argentine Markets Still Suffering Despite Bold Actions”

Lessons from the Past for Turkey

The Turkish lira continues to tumble as officials refrain from taking any significant actions. We look at two of Turkey’s past crises to gauge the economic toll that this current crisis is likely to take. Continue reading “Lessons from the Past for Turkey”

Why Tariffs will Not Reduce the US Trade Deficit

US tariffs are ostensibly to reduce the trade deficit, but we are skeptical that it will work, due to rising input costs, retaliatory tariffs and ongoing growth differentials.  At same time, the funding of the US imbalance is still smooth and has actually improved.

Continue reading “Why Tariffs will Not Reduce the US Trade Deficit”

Turkey Drives Risk-Off, but Pressure Abating

Turkey’s response to the pressure on it currency fell well shy of what is needed to stabilize the situation.  This continues to encourage risk-off activity, which seems, among the major currencies to be exaggerated. 

  Continue reading “Turkey Drives Risk-Off, but Pressure Abating”

Erdogan Signals A Lot More Pain Ahead For Turkey

It seems that rather than offer any orthodox policy solutions, Turkish President Erdogan is doubling down on his confrontational stance. This spells more trouble for Turkish markets when they open Monday. The rumored emergency meeting between Turkish regulators and banks did not materialize this weekend.   Continue reading “Erdogan Signals A Lot More Pain Ahead For Turkey”

What Has Changed in EM

  • Moody’s upgraded Vietnam one notch to Ba3 with stable outlook
  • The National Bank of Romania delivered a dovish surprise
  • US State Department announced new sanctions on Russia for its nerve gas attack
  • Central Bank of Russia said it may reduce its volume of daily FX purchases under the budget rule in order to help reduce FX volatility
  • US President Trump added fuel to the fire by announcing increased tariffs on Turkish imports
  • Turkey tweaked foreign currency reserve requirements for commercial banks
  • S&P upgraded Israel a notch to AA- with stable outlook
  • A widening graft probe in Argentina is raising concerns Continue reading “What Has Changed in EM”

Sanctions Risk to Weigh on Russian Assets

Russian assets are coming under greater pressure after various sanctions were announced by the US. The final tally of sanctions is not yet known, but uncertainty regarding their ultimate impact on the economy is likely to keep Russian assets under pressure. Continue reading “Sanctions Risk to Weigh on Russian Assets”

The Yin and Yang of the US-China Relationship

The US-China relationship sits at the center of the global political economy.  We fear that the narrative in the press and among economists locate China as the main threat to the world order.  We offer this non-consensus macro view.  

Continue reading “The Yin and Yang of the US-China Relationship”

New Bank of Israel Governor Likely to Lead to Firmer Shekel

The shekel traded at its weakest level since March 2017 this week. With inflation pressures rising, the incoming central bank Governor will likely start hiking rates and accepting a firmer exchange rate. Continue reading “New Bank of Israel Governor Likely to Lead to Firmer Shekel”