Following the recent surge in risk aversion, the EMEA currencies sold off. However, the picture is now turning back towards more risk-taking again after a stream of better-thanexpected US macro data and renewed commitment on the part of global policymakers to continue to pump liquidity into global financial markets.

This morning our EMEA FX Scorecard’s overall total score has turned positive for the first time in exactly two weeks. We therefore call an end to the correction in the EMEA FX markets – at least for now.

Bullish signals on PLN, CZK, TRY and ZAR

The Scorecard has swung back into positive territory for PLN, CZK, TRY and ZAR, although HUF remains in negative territory. See the scores on page 2.

The reason for the steep improvement in the scores is an improvement on the technical score and global conditions (recent strong US numbers and a rebound in the US stock markets). Overall, however, the carry scores remain skewed to the downside with the exception of Poland.

Go back to being long in EMEA FX - especially the zloty

Even though significant long-term risks persist, we believe the signals from our EMEA FX Scorecard should be trusted and therefore we recommend being positioned for a continued strengthening of the EMEA currencies.

The Polish zloty scores the highest of the five currencies covered in the EMEA FX Scorecard and it is the only currency that scores positively on all five sub-scores – macro, technical, carry, global and valuation. We therefore see most value in the zloty and would in general recommend investors to be positioned for a further move down in EUR/PLN. We maintain our three-, six- and 12-month forecasts on EUR/PLN at 4.10, 4.05 and 4.00, respectively.

More value in regional FX markets than in the fixed income markets

If the rally in the EMEA currencies continues as indicated by our Scorecard, it is hard to imagine the EMEA fixed income markets selling off dramatically. That said, we think that the EMEA FX markets are much more fairly priced than the fixed income markets in the region and continue to believe that yields have come down too much and therefore we would prefer to take advantage of the renewed risk appetite in the regional FX markets rather than in the fixed income markets.

Politics could still spoil the fun

Political risk remains elevated in a number of Central and Eastern European countries – especially Latvia, Romania and Ukraine – and there is no doubt that negative political news could still spoil the renewed appetite for EMEA assets.