Free Trial
LATAM FX

Price Signal Summary - USDCLP Heads North

US TSYS

Early Eurodollar/SOFR/Treasury Option Roundup

BELGIUM

BNB Business Confidence adds to Eurozone Woes

CANADA

Can-US Yield Differentials Nudge Off Cycle Lows

MNI EXCLUSIVE

MNI examines talk of an emergency BOE meeting and rate hike

Real-time Actionable Insight

Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.

Free Access

EM Financial Conditions Easing After Sharp Tightening (2/2)

EMERGING MARKETS
MNI (London)
  • Brazil has seen the largest financial conditions tightening since the beginning of 2021 according to the GS FCI, with a 7.9% increase from January 2021 to the mid-July high. The speed of tightening by the Brazilian central bank is largely accountable for this sharp shift in tightness, hiking by 11.75% over this period.
  • Following Brazil, GS FCI tightening over the period from Jan 2021 to June/July 2022 highs is Turkey (up 7.4% albeit largely due to economic instability powered by a stark depreciation of the lira), Mexico (+3.3%) and South Africa (+2.4%).
  • The GS FCI has seen a recent shift towards a loosening trajectory since mid-July. With both Brazil and Indonesia seeing some of the swiftest loosening, commodity exporters could have the upper hand here, however it is too early to confirm the onset of a more persistent downwards trajectory.
  • Financial conditions seeing some relief again is underpinned by the USD coming off its peak and equities coming off bottoms following the substantial sell-off. Furthermore, markets have already largely priced in the bulk of US hiking. This morning the PBOC unexpectedly cut rates after a slew of weak economic data, adding to the general consensus of global monetary tightening coming to a close around year-end as real rates begin to move out of negative territory (more on this here).
  • Despite this year's rash global tightening, financial conditions remain relatively loose for EMs compared to historical levels.


Keep reading...Show less
245 words

To read the full story

Why Subscribe to

MarketNews.com

MNI is the leading provider

of news and intelligence specifically for the Global Foreign Exchange and Fixed Income Markets, providing timely, relevant, and critical insight for market professionals and those who want to make informed investment decisions. We offer not simply news, but news analysis, linking breaking news to the effects on capital markets. Our exclusive information and intelligence moves markets.

Our credibility

for delivering mission-critical information has been built over three decades. The quality and experience of MNI's team of analysts and reporters across America, Asia and Europe truly sets us apart. Our Markets team includes former fixed-income specialists, currency traders, economists and strategists, who are able to combine expertise on macro economics, financial markets, and political risk to give a comprehensive and holistic insight on global markets.
  • Brazil has seen the largest financial conditions tightening since the beginning of 2021 according to the GS FCI, with a 7.9% increase from January 2021 to the mid-July high. The speed of tightening by the Brazilian central bank is largely accountable for this sharp shift in tightness, hiking by 11.75% over this period.
  • Following Brazil, GS FCI tightening over the period from Jan 2021 to June/July 2022 highs is Turkey (up 7.4% albeit largely due to economic instability powered by a stark depreciation of the lira), Mexico (+3.3%) and South Africa (+2.4%).
  • The GS FCI has seen a recent shift towards a loosening trajectory since mid-July. With both Brazil and Indonesia seeing some of the swiftest loosening, commodity exporters could have the upper hand here, however it is too early to confirm the onset of a more persistent downwards trajectory.
  • Financial conditions seeing some relief again is underpinned by the USD coming off its peak and equities coming off bottoms following the substantial sell-off. Furthermore, markets have already largely priced in the bulk of US hiking. This morning the PBOC unexpectedly cut rates after a slew of weak economic data, adding to the general consensus of global monetary tightening coming to a close around year-end as real rates begin to move out of negative territory (more on this here).
  • Despite this year's rash global tightening, financial conditions remain relatively loose for EMs compared to historical levels.


Keep reading...Show less