"We think general market price action across asset classes will move between three key themes (Great Flotation – QE tapering delayed - EM FX positive, Great Slowtation – QE tapering starts but before macro data warrants it – EM FX negative, Great Rotation – QE tapering starts but after macro data has improved substantially – EM reasonably supported but with diverging fortunes on a currency by currency basis)."
"In bouts of EM selling we expect to see greater differentiation between currencies and when the Fed does begin tapering QE this differentiation will increase. Indeed, in the second half of 2014 we expect traditional macroeconomic factors (including some central banks switching to a tightening bias) to become a major driver of currency price action, arguably for the first time in over five years."
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