Currencies

The death of the Iranian president reinforces our base case view of Middle Eastern instability and at least minor oil supply shocks. Rapid geopolitical developments in recent weeks are pointing to a new bout of global instability. The US is hobbled by its election. Conflicts with Russia, China, and Iran are all now escalating at the same time, at least marginally. Investors should reduce risk and shift to more defensive assets, markets, and sectors.

We dig into the USD-denominated Emerging Market Sovereign Index to see which credit tiers and countries offer value relative to US Credit.

ASEAN stocks and currencies will weaken further as these economies face multiple headwinds. Raising policy rates did not stop a sliding currency in the past, it is unlikely to do so now.

Modi and the BJP are at or near the peak of their political dominance, and their third term will be challenging as they must deal with harder reforms amidst a slowing domestic and global economic environment. In the long run, however, we remain constructive on India’s prospects, as its geopolitical and economic positioning are favorable and improving.

In this report, we review our trade recommendations based on incoming data in the last month.

An update to our views on UK rates and currency following today’s Bank of England meeting.

Mexico’s election and the US election pose short-term and potentially medium-term risks to Mexican financial assets. But unless the ruling party wins a double supermajority, we remain structurally overweight Mexico relative to global stocks excluding the United States.