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5 Oct 2015
EM's in a fragile environment - TDS
FXStreet (Guatemala) - Analysts at TD Securities explained that after two horrendous months, EMs are trying to gain some traction on the heels of improving sentiment.
Key Quotes:
"Last week’s NFP in the US may have been the last nail in the coffin of Fed tightening risks this year. This has triggered an unexpected positive reaction that continues into the new week. Though we understand the reasons why EMs applaud any delay of Fed hikes, recent patterns have been much less predictable than usual."
"But risk appetite remains incredibly fragile and hinges on the fine balance between delays in monetary normalization and the depth of the wounds that the underlying economy hasn’t been able to heal yet. Too much of the former would imply a more serious case for the latter, which is not good for EM asset performance."
"The Fed remains data dependant and the minutes from the September FOMC will be scrutinized for cues on Wednesday. We expect the report to reinforce the Fed’s prevailing bias for a 2015 start to the normalization in rates, but see risks biased towards a dovish interpretation by the market.
The ECB will also be under scrutiny for the account of the September monetary policy meeting. In this case, we’ll be looking for additional signs that further easing is due in 2015."
Key Quotes:
"Last week’s NFP in the US may have been the last nail in the coffin of Fed tightening risks this year. This has triggered an unexpected positive reaction that continues into the new week. Though we understand the reasons why EMs applaud any delay of Fed hikes, recent patterns have been much less predictable than usual."
"But risk appetite remains incredibly fragile and hinges on the fine balance between delays in monetary normalization and the depth of the wounds that the underlying economy hasn’t been able to heal yet. Too much of the former would imply a more serious case for the latter, which is not good for EM asset performance."
"The Fed remains data dependant and the minutes from the September FOMC will be scrutinized for cues on Wednesday. We expect the report to reinforce the Fed’s prevailing bias for a 2015 start to the normalization in rates, but see risks biased towards a dovish interpretation by the market.
The ECB will also be under scrutiny for the account of the September monetary policy meeting. In this case, we’ll be looking for additional signs that further easing is due in 2015."