26 Jun 2015
A glance at EM FX – TDS
FXStreet (Edinburgh) - The FX Strategy team at TD Securities gives a quick review of the EM FX space.
Key Quotes
“Growth remains robust in Hungary and Poland, and they are well-positioned to benefit from any EZ upswing. Inflation is below target and is likely to remain there until well into 2016. Growth remains lacklustre in both Turkey and South Africa, but rising inflation is a concern, particularly in Turkey. Russia economy to shrink by about 4% this year, but the inflation rate is expected to trend downwards over the rest of this year”.
“In Hungary, we are near the end of the easing cycle. Rates will then, as in Poland, stay on hold for some time. In Russia, after a few months’ pause, the easing cycle will continue. In Turkey, the next move in rates is up. If a coalition is formed then hikes will be gradual and moderate. If new elections are called then emergency hikes will be required. In South Africa, the SARB is soon to start hiking rates moderately”.
“Strong growth and continuing EZ QE should bias EURHUF and EURPLN lower, but PLNHUF may weaken due to increasing political risks in Poland. USDRUB likely to stay in a 50-60 trading range. Near-term the direction of USDTRY depends on the outcome of the coalition negotiations, but in the medium-term it will trend higher. The weak economy will stop ZAR from benefitting from higher rates and we see USDZAR trending higher”.
Key Quotes
“Growth remains robust in Hungary and Poland, and they are well-positioned to benefit from any EZ upswing. Inflation is below target and is likely to remain there until well into 2016. Growth remains lacklustre in both Turkey and South Africa, but rising inflation is a concern, particularly in Turkey. Russia economy to shrink by about 4% this year, but the inflation rate is expected to trend downwards over the rest of this year”.
“In Hungary, we are near the end of the easing cycle. Rates will then, as in Poland, stay on hold for some time. In Russia, after a few months’ pause, the easing cycle will continue. In Turkey, the next move in rates is up. If a coalition is formed then hikes will be gradual and moderate. If new elections are called then emergency hikes will be required. In South Africa, the SARB is soon to start hiking rates moderately”.
“Strong growth and continuing EZ QE should bias EURHUF and EURPLN lower, but PLNHUF may weaken due to increasing political risks in Poland. USDRUB likely to stay in a 50-60 trading range. Near-term the direction of USDTRY depends on the outcome of the coalition negotiations, but in the medium-term it will trend higher. The weak economy will stop ZAR from benefitting from higher rates and we see USDZAR trending higher”.