Trade Tensions with China Set to Escalate

new China

The two main legislative initiatives in the US this year, the repeal of the Affordable Care Act and the tax changes, are not particularly popular.  However, the next items on the agenda appear to enjoy broader support.  The infrastructure initiative is likely to be unveiled as early as next month.  Before that, the US is poised to ratchet up the tension on China.  

 

Despite the unilateral thrust of the Trump Administration, in its confrontation with China, it has been wise to coordinate efforts with the EU and Japan.  Last week, the three issued a joint statement, a thinly veiled criticism of China for its policies and funding that led to excess capacity in numerous sectors.  They agreed to target market-distorting subsidies. 

Continue reading

What Has Changed in EM

Icon

  • China eased curbs on coal use for heating in the northern provinces to cope with colder weather
  • Poland announced a cabinet shuffle
  • Poland’s lower house approved the controversial judicial reform bill
  • President Trump announced that the US recognizes Jerusalem as Israel’s capital
  • Brazil COPOM was more dovish than expected after cutting rates 50 bp to 7.0%
  • Chile central bank cut its 2017 and 2018 inflation forecasts and shifted to a more dovish stance Continue reading

Cyber-Monday: Venezuela, UK, CME/CBOE

new bitcoin

While investors are musing about the final form the US tax changes and the Brexit negotiations, cyber-currency interest has been bolstered by Venezuela’s announcement over the weekend.  President Maduro said that Venezuela would issue a digital currency.  It could be the first sovereign to do so, which would seem to undermine the decentralized nature of crypto-currencies.  

Continue reading

EM Preview for the Week Ahead

blog-icons-empreview emerging markets previewEM FX ended the week on a mixed note.  US jobs data may refocus market attention on Fed tightening.  Most EM inflation readings this week are expected to show easing price pressures, supporting a dovish EM central bank outlook.  The major exceptions are Mexico and Turkey, whose central banks may be forced to tighten policy in the coming weeks. Continue reading

What Has Changed in EM

Icon

  • Bank of Korea hiked rates by 25 bp to 1.50%, the first hike in six years
  • Egypt central bank lifted the last remaining currency controls
  • S&P cut South Africa’s foreign currency rating one notch to BB with stable outlook
  • Turkey President Erdogan was implicated in an alleged plot to help Iran evade US sanctions
  • Moody’s upgraded Argentina one notch to B2 with stable outlook
  • The IMF approved a new $88 bln Flexible Credit Line (FCL) for Mexico
  • Mexico shook up its economic team
  • Brazil press is reporting that the pension reform vote may be delayed to 2018 due to lack of support Continue reading

EM FX Technical Picture: How Far Can This Correction Go?

MindMkts Blog ICON-FX TechPicHow far can this EM FX correction go?  Since mid-November, the greenback has been broadly softer due to a variety of factors.  EM FX has taken advantage of this, and the top EM performers are ZAR (+5.5%), MXN (+3.8%), and RUB (+3%).  TRY has been noticeably lagging, -1.4% since November 15.  Many EM currencies are starting to bump up against key chart points, and so the dollar may finally get some traction in the coming days. Continue reading