Macro: Recovery continues, but some worries emerge
- The global economic recovery continues. However, over the past few months, there have been some negative surprises in the G3 economies. However, the news out of most Emerging Markets continues to be mostly positive.
Rates and yield: A mixed picture, but look for higher rates
- It has been a bit of a mixed picture for the Emerging Markets’ fixed income markets. While rates and yields have risen sharply in Brazil and South Africa, we have seen the opposite happening in, for example, Hungary, the Czech Republic and Indonesia. We mainly see upside on Emerging Markets’ rates and yields going forward as the G3 quantitative easing measures are scaled back and the expectation for rate hikes – for example in Brazil – will raise the bar for rates in Emerging Markets.
FX: Most positive, but CEE FX underperforms
- Most Emerging Markets’ currencies have strengthened over the past month. In particular, INR and PHP continue the rally. It is also notable that RUB has continued to strengthen on the back of high oil prices and continued strong risk appetite. Concerns over the Baltic situation, outlook for further monetary easing and political uncertainty in Poland and Romania on the other hand have weighed on the CEE currencies over the past month.
