Thursday’s session was dominated by central bank meetings, with monetary policy decisions that were in line with expectations. The status quo prevailed in most cases, notably in Sweden (key rate kept at 2.25%), the UK (4.5%) and South Africa (7.5%).
Positive growth impulse in Europe counters tariff hit to Asia The pick-up in risk aversion at the start of this week amongst market participants has triggered a correction lower for emerging market currencies. The CLP (-1.7% vs. USD), COP (-1.2%), BRL (-1.1%), IDR (-0.9%) and THB (-0.7%) have weakened the most since the end of last week while the Central European currencies of the CZK (+0.3% vs. USD) and HUF (+0.1%) have continued to outperform.
The last four weeks have delivered more uncertainty and volatility as expected and yet there were still a lot of surprises. Particularly surprising is the retreat of the USD amid rising risk aversion. Is this the end of US exceptionalism and USD supremacy? Perhaps, but uncertainty remains too high to take strong po- sitions. The safest bet in our view remains long JPY.
