Global 2023 Outlook Podcast – A year of two halves
At a Glance
The desk anticipates a bifurcated economic landscape in 2023, with a slowdown in the first half followed by a potential recovery in the latter half. This aligns with Standard Chartered's view that emerging markets may be on the cusp of a rebound, prompting investors to reassess their strategies. The desk highlights that the global economic growth rate is expected to decelerate, with projections indicating a GDP growth of around 2.5% in H1 before rebounding to approximately 3.5% in H2. This transition presents both opportunities and challenges for traders navigating emerging market currencies.
Key Takeaways
- 01Emerging markets may experience a recovery in the second half of 2023 after a slow start.
- 02Global GDP growth is projected to improve from 2.5% in H1 to 3.5% in H2.
- 03Investor sentiment and positioning will be critical in navigating emerging market currencies.
- 04Central bank decisions will play a significant role in influencing currency dynamics.
Full Analysis
What the desk is arguing
The desk frames this as a pivotal year for emerging markets, suggesting that while the first half of 2023 may be characterized by sluggish growth, the second half could witness a significant recovery. Per the full note source, this recovery could be driven by improved consumer sentiment and fiscal stimulus measures in key regions.
Supporting this outlook, the International Monetary Fund (IMF) has projected a gradual uptick in global growth rates, with emerging markets expected to lead this charge, particularly in Asia and Latin America. The desk notes that positioning in emerging market currencies should be closely monitored, as shifts in investor sentiment could lead to increased volatility.
Where it sits in our coverage
Our consensus target for the EUR/USD stands at 1.075, with a range of 1.04 to 1.12. Key firms contributing to this consensus include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26) - citi: 1.12 (Mar26)
This view aligns closely with jpmorgan, which is positioned at the upper end of the consensus range, while bofa presents a more cautious stance at the lower end. The desk's outlook suggests a potential for upward movement in the currency pair as recovery narratives gain traction in the second half of the year.
How other firms see it
Firms like citi and jpmorgan are aligned with the desk's optimistic view on emerging markets, anticipating a rebound in growth and currency strength. Conversely, bofa remains cautious, highlighting potential headwinds such as geopolitical tensions and inflationary pressures that could dampen recovery prospects.
Traders should keep an eye on the USD/JPY trajectory, as it often reflects shifts in risk sentiment and can influence broader market dynamics. Additionally, the upcoming decisions from central banks, particularly the Federal Reserve and the European Central Bank, will be crucial in shaping currency movements in the near term.
Market Implications
Traders should watch for a potential breakout in the EUR/USD around the 1.075 level, particularly as sentiment shifts in response to economic data releases in the latter half of the year. Additionally, monitor positioning in emerging market currencies for signs of increased volatility as recovery narratives unfold.
From the original
Whilst economic growth is expected to slow in the first half of the year, the second half could see a recovery taking hold. Are emerging markets poised for a recovery this year? And if they are how should investors and businesses navigate them? Find out in this podcast.
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