Market tone remains dominated by the anticipation of the Fed policy stance shift (QE tapering), and the consequent unwinding of positioning in risk asset which is leading to broad based USD strength, yield curve steepening and EMFX underperformance. In this environment, country specific fundamentals continue to take the back seat to technicals / positioning, and we are hesitant to attempt to call a bottom as we believe a potential rebound from likely USD strength overshooting will likely be slower than the ongoing sharp USD rebound. We believe that a potential indicator of when the USD rally has run its course is the end of EM‐local‐yield curve steepening.
Read full report: FX Daily
Scotiabank