Emerging Markets: BBH Market Strategists provide intra-day commentary on currency, economic and geopolitical developments in the emerging and frontier markets.
EM FX ended last week on a firm note, fueled by news that the US shutdown was ending (at least temporarily). This week brings some potential for more positive headlines regarding Brexit, US-China trade talks, and Fed policy. Yet all three could pose negative risks too. We believe the US rates markets still need to normalize before the dollar can get significant traction.
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.
The South African Reserve Bank meets tomorrow and is widely expected to keep rates steady at 6.75%. The recent release of the ANC’s election manifesto suggests a modification of the central bank’s mandate, which we think would be a mistake. Longer-term, we see more downgrades and loss of investment grade from Moody’s.
Continue reading “South African Reserve Bank on Hold Ahead of Spring Elections”
Bank Indonesia meets Thursday and is expected to keep rates steady at 6.0%. If the rupiah remains relatively firm, then BI is likely to remain on hold for the time being. Elections in April are unlikely to have much impact as Jokowi is widely expected to win a second term.
Continue reading “Bank Indonesia on Hold as Rupiah Solid Ahead of April Elections”
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.