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FX BANK FORECAST · COVERAGE
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Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 38 institutional desks. No promotion.
FX BANK FORECAST · COVERAGE
Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 38 institutional desks. No promotion.
The desk views emerging market assets as displaying resilience in the first half of 2016, buoyed by a favorable external environment and key local factors. Per the full note from Goldman Sachs, strategist Kamakshya Trivedi points to influential dynamics such as China's recovery and Brazil's ongoing reforms. Emerging markets have outperformed expectations, showing a robust response to global monetary easing and stabilizing commodity prices. The desk expects this trend to continue, pending alignment with macroeconomic conditions.
Emerging markets are demonstrating remarkable performance, allowing for a more optimistic outlook in 2016. As articulated in Goldman Sachs' commentary, a combination of a supportive external backdrop and restructuring efforts in local economies contribute significantly to this trend.
The positive stance is underscored by recent macroeconomic indicators showing signs of recovery, notably in China, which has seen growth stabilization. This thematic shift comes at a pivotal time for markets that have faced significant volatility due to previous sluggishness.
We're currently tracking a consensus target of 1.075 for USD/EM on a six-month horizon, with the following firms providing specific targets:
This positional outlook aligns closely with jpmorgan, suggesting an optimistic angle on emerging market currencies, while bofa takes a more cautious approach, starting at the lower end of the spectrum.
Among aligned firms, jpmorgan and goldman share a bullish view on emerging markets, supporting this positive sentiment. Conversely, bofa remains wary, highlighting potential risks tied to global growth.
Key related indicators to monitor include commodity price trends and the performance of the USD, which will be critical in shaping the trajectory of emerging market currencies in the near term.
Key takeaways
Market implications
Traders should closely monitor USD/EM movements, particularly the 1.075 level, as a potential pivot point for emerging market currencies. Additionally, pay attention to global economic indicators, which could prompt adjustments in positions as new data emerges.
Risks to this view
A significant deterioration in global economic conditions or a resurgence of volatility in commodity markets could undermine the positive outlook for emerging markets. Should these factors materialize, we could see a rapid shift in investor sentiment, pressuring emerging market currencies.
A better external backdrop is just part of the reason why emerging market assets have surprised in the first half of 2016. Kamakshya Trivedi, chief Emerging Markets macro strategist in Goldman Sachs Research, considers the local and global factors influencing asset prices in developing economies around the world, including China, Brazil and India. This podcast was recorded on May 17, 2016.
All price references and market forecasts correspond to the date of this recording. This podcast should not be copied, distributed, published or reproduced, in whole or in part. The information contained in this podcast does not constitute research or a recommendation from any Goldman Sachs entity to the listener.
Neither Goldman Sachs nor any of its affiliates makes any representation or warranty, as to the accuracy or completeness of the statements or any information contained in this podcast and any liability therefor (including in respect of direct, indirect or consequential loss or damage) is expressly disclaimed. The views expressed in this podcast are not necessarily those of Goldman Sachs, and Goldman Sachs is not providing any financial, economic, legal, accounting or tax advice or recommendations in this podcast. In addition, the receipt of this podcast by any listener is not to be taken as constituting the giving of investment advice by Goldman Sachs to that listener, nor to constitute such person a client of any Goldman Sachs entity.
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