At Any Rate EM Fixed Income Focus: Trading the trade war ceasefire
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May 15, 2025 Saad Siddiqui, an Emerging Markets Strategist at JPMorgan, joins Jonny Goulden to dissect the latest trends in EM fixed income following U.S.-China tariff reductions. They delve into the impacts of trade dynamics on emerging market currencies, revealing how global factors shape their relationship with the U.S. dollar. The conversation highlights the evolving credit outlook for emergent corporates and examines recession probabilities. Siddiqui's insights offer a fresh perspective on navigating market conditions in today's complex environment.
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Recession Risk Lowers Post-Tariff Ceasefire
- The US tariff de-escalation lowered recession risk, shifting it from a base case scenario. - EM markets have witnessed a strong sentiment rebound, nearing overbought levels after the tariff relief rally.
EM Currency Moves Driven by Dollar Dynamics
- EM currencies rally mainly against the US dollar amid trade war de-escalation and optimism on currency deals. - However, EM currencies remain weak versus the euro, yen, and franc, reflecting dollar-centric strength shifts.
Divergence Between EM and US Rates
- EM rates remain lower despite US rates sell-off due to fading tariff fears and mixed growth prospects. - Some EM regions are ending hikes or cutting rates, so duration in select markets remains bullish.