EMFX Macro Mid-Year Review

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Image from DALL-E.Subscribe nowIt’s been an eventful first half of 2024 with lots to discuss, as we seemingly move towards the start of the easing cycle in the US, and with 6 months since my last note, it seems a good moment to take stock.As I mentioned at the beginning of the year, these notes will be few and far between, given my commitments at Argo. I wrote a weekly update for a time, but that came to an end late last year when I joined Argo Capital Management, an EM-focused Hedge Fund. With their consent, I will write occasional personal views on the market. Argo invests in a range of EM assets from liquid macro-driven EM investments, similar to those I discuss in these notes, to distressed debt. FX is not a dominant asset class at Argo, and my activities cover a broader range of investments, but for these notes, I will continue to stick to EM FX.In this note, I will discuss:Review of H1 2024OutlookA brief note on TrumpA framework for the current EM FX environmentIIF CEE TripReview2024 began with an aggressively discounted Fed easing cycle with 7 cuts in the price, and some expecting that to begin as soon as March. By April, barely 1 2024 cut remained in the curve, as Q1 delivered consecutive upside inflation surprises in the US, along with a solid growth outlook. Today we once again have aggressive easing priced, but this time it’s a response to a notable softening in the US labour market, together with a reversal of the Q1 inflation surprises. The recent repricing has come with significant market turmoil, including an equity correction and an unwind of FX carry trades…