U.S. Election May Play Out Like An EM Equivalent For EM FX

Citi remains "cautious in CEEMEA and LatAm, but long in Asia FX. On the US election, it may play out like an EM election. For EM this means weaker credit and EMFX, and lower rates into the election. The timing is unclear, though, as the vaccine news flow is likely positive in the coming month. LatAm FX is an interesting laggard trade if the vaccine narrative persists. The problem with laggard trades is that they only work if the leaders keep trading well, too. With equities more shaky, the leaders may be at risk on a tactical basis, increasing caution. In rates the team prefers selected short ends to duration."