EM FX Carry Trade Update October 22, 2019
Emerging market carry trades are enjoying maximum support from the market backdrop, as risk sentiment has been boosted by prospects for a quick and soft Brexit deal and hopes that a US-China trade deal on the way. But if we have yet to reach the bottom of the growth cycle, can EM currencies continue to rise without incident?
EMs – Are we on the verge of a rally?
We believe we are at the early innings of an EMs rally that could materialize in early 2020, fueled by improved growth, less trade war frictions between the US and China and a weaker dollar.
FX Update: Brexit endgame finally starts today
After avoiding two votes over the last three days, the UK Parliament will finally have to take a pivotal vote today on the Brexit deal negotiated by Boris Johnson, though several scenarios remain even if the vote passes. Regardless of the outcome, a rare snap election in December is likely in the cards. The picture elsewhere dominated by rising bond yields and the coincident weakness in the Japanese yen and US dollar.
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