This via a JP Morgan, they argue that market themes have not changed
Its a detailed piece, but in very brief:
EM FX weakness accelerated in August in absence of broader USD strength or higher US yields
- Second, is growing spillover from individual hotspots into broader EM FX
- US trade policy … (JPM) conclude that the elevated tension and focus on trade issues we saw unfold throughout the second half of summer will persist well into the fall
Macro Trade Recommendations:
- upward pressure on USD, CHF and to a lesser extent JPY is the inevitable outcome from a phase of de-risking in EM
- Shorts in AUD and NZD remain a viable proxy in G10 space for the vicious circle that now confronts EM FX
- Stay short EUR/CHF despite less worrying signals on the Italian budget but rotate from GBP/CHF into NZD/CHF as gamma risk from Brexit headlines is now quite punitive
