Emerging Markets: Fearing the Fed – Nordea Markets
There is a great news for EM FX as the markets have almost completely priced out any Fed hikes in 2019 and US Treasury yields have fallen well below 3%.
“EM FX has not seen much benefit and now seems to be sailing in the calm before a storm. Either the Fed will continue according to its plan – bad news – or it won't, and probably because the US economy has slowed down much more than expected, which is also bad news.”
“2019 could thus prove to be another difficult year for EM FX, where we believe EM central banks are more likely than not to hike policy rates to compensate investors for higher risks and thereby postpone any meaningful recovery in their respective economies.”