China-exposed currencies, non-oil commodity producers to underperform – Goldman Sachs

By FXStreet Research Team at Goldman Sachs, suggests that while the temporary rebound in oil prices has seen EM FX rebound as well, they continue to expect high volatility in the oil market until 2016H2.

Key Quotes

“This is based on the view that prices need to remain low enough to force fundamentals to create the adjustment back towards a new equilibrium. Specifically, our Commodities team argues for a range between $20/bbl and $40/bbl, while retaining their positive 12-month outlook of $54/bbl (Brent) from spot levels. These forecasts would suggest more volatility in the coming months for the oil exporters’ currencies, and stabilisation towards the end of the year. The RUB and MXN, where valuation levels are supportive, should be key beneficiaries, and our 12-month forecasts see potential for appreciation to 66 for $/RUB and 17.5 for $/MXN. The starting valuation level is arguably less supportive for the COP, as Colombia’s current account deficit remains excessive and our forecasts call for further depreciation to 3,600 in 12 months.

In contrast, we expect metals to underperform oil during 2016H2 and 2017, on the back of lower demand growth from China. We have revised down our aluminium and copper prices to US$1,350/mt and US$4,000/mt respectively, which …read more

Source:: FX Street