Drivers for the Week Ahead

  • We believe the dollar rally remains on track
  • FOMC minutes will be released Wednesday; there is a full slate of Fed speakers this week
  • Eurozone flash PMIs will be reported Thursday; UK reports April CPI Wednesday
  • Japan has a heavy data week; RBA minutes will be released Tuesday
  • In EM, the central banks of Israel and South Africa meet Continue reading “Drivers for the Week Ahead”

EM Preview for the Week Ahead

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. Continue reading “EM Preview for the Week Ahead”

What Has Changed in EM

  • Pakistan reached agreement with the IMF for a $6 bln 3-year Extended Fund Facility
  • Philippines central bank cut reserve requirements by two percentage points to 16%
  • The US announced it would cut tariffs on Turkish steel by half to 25%
  • Egypt reached agreement with the IMF to unlock $2 bln of aid in final review of its 3-year Extended Fund Facility
  • Brazil saw nationwide protests against proposed cuts in the education budget Continue reading “What Has Changed in EM”

Frontier Sovereign Rating Model For Q2 2019

We have produced the following ratings model to assess relative sovereign risk in Frontier Markets. A country’s score directly reflects its creditworthiness and underlying ability to service its external debt obligations.  Continue reading “Frontier Sovereign Rating Model For Q2 2019”

Some Thoughts on the Upcoming Semiannual US Treasury FX Report

The US Treasury will soon release its semiannual report to Congress on “Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States.” As well as adjusting the criteria for being named a currency manipulator, more countries will reportedly come under scrutiny. Yet despite the current trade frictions, we do not think China will be named as a manipulator. Continue reading “Some Thoughts on the Upcoming Semiannual US Treasury FX Report”

Drivers for the Week Ahead

  • Trade tensions should dictate the tone of global financial markets this week, and it won’t be pretty
  • The US data highlight this week is April retail sales Wednesday
  • A deeper and more protracted trade war is one of those exogenous shocks that could tip the US into recession
  • In the eurozone, the focus this week is more political than economic
  • UK reports labor market data Tuesday; Canada reports April CPI Wednesday; Australia reports April labor market data Thursday
  • In EM, several central banks meet this week Continue reading “Drivers for the Week Ahead”

EM Preview for the Week Ahead

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. Continue reading “EM Preview for the Week Ahead”

What Has Changed in EM

  • Higher US tariffs on $200 bln of Chinese goods went into effect today at midnight
  • North Korea conducted two short-range ballistic missile tests
  • Bank Negara Malaysia cut rates 25 bp to 3.0%, as expected
  • Thailand finally released official results from the March election
  • Turkish election board nullified the results of the Istanbul mayoral vote
  • State-owned Turkish banks were reportedly selling USD for TRY during Asian hours.
  • The ANC is headed to a solid victory in South Africa
  • Argentina President Macri is attempting to isolate rival Cristina Fernandez Kirchner ahead of October elections Continue reading “What Has Changed in EM”

My Baby, Xi Wrote Me A Letter

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. Continue reading “My Baby, Xi Wrote Me A Letter”