EM FX Macro Review

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Photo by Erol AhmedSubscribe now30th June 2023At the end of H1 and with some holiday time coming up I want to review this year so far, reflecting on earlier thesis, with the hope of gaining insight into which views are still valid and which have had their time. I’ll do that after a brief review of the past week's markets and macro.Share EM FX MacroWeekly reviewIt suits the purposes of this note that we’ve had a quiet week and we have. Investors are digesting a higher-for-longer outlook for DM rates, wrestling with the same mysteries that have been present for much of the year. Post-pandemic, post-energy-spike economic forecasting seems unusually difficult, particularly for advanced economies where the level of government intervention was so extreme and the impact on households so divergent. Somewhat in contrast, EM economies have a more conventional look where strong and timely central bank responses look to have been effective in the main and will begin to be unwound later this year. If I were at a fund, I would expect to be more active in EM rates than in most other areas. As it is, I remain very lightly invested at this juncture in EM FX Carry in the ways discussed in prior notes.At the end of the month, we begin to get BoP data from EM economies. We saw the normalisation of the Brazilian current account (lower) and a wider-than-expected trade deficit in Thailand. Taiwanese industrial production improved on the month which gives encouragement to hopes of a regional pick-up in manufacturing activity. We had an upside surprise from Mexican GDP data, and broadly in-line inf…