EM’s rally but is it sustainable? – BBH

By FXStreet FXStreet (Guatemala) – Analysts at Brown Brothers Harriman explained that EM is enjoying a nice bounce to end the week.

Key Quotes:

“Surging oil is one factor, while further ECB (and potentially BOJ) stimulus is another. The Fed tightening, while still alive, has likely been pushed out a bit by the markets in terms of timing. The global liquidity outlook has clearly moved in favor of EM, at least for now. Indeed, the million dollar question is: Has EM bottomed? Longer-term, the commodity situation remains murky as the supply-demand imbalance remains in place.

We have always felt that a halt to the commodity plunge was a necessary but not sufficient condition for overall EM sentiment to improve. Fed tightening will eventually happen, and this will should put the broad-based dollar rally back on track. Lastly, the global growth picture does not seem to favor EM just yet. The IMF provided a reminder this week with its forecast revisions.

Bottom line: enjoy this EM rally with a short-term timeframe in mind, with the idea that EM turbulence will likely return later this year. With that in mind, we identify some possible retracement …read more

Source:: FX Street