Emerging Market Weekly Pulse

Risk-off sentiment driven by geopolitical volatility and US inflation concerns is negatively impacting EM assets. Analysts are shifting toward caution, revising rate and FX forecasts for countries like Indonesia and Turkey.

Key Takeaways

• 1.Risk-off sentiment is returning due to Middle East geopolitical conflict, which is expected to pressure EM assets and FX while supporting the USD and US rates.
• 2.The Chinese economy displays deepening divergence between resilient export/AI-tech sectors and weak domestic/non-tech demand.
• 3.Indonesia's central bank (BI) is expected to continue raising rates to stabilize the IDR, with forecasts for the policy rate revised up to 6.0% by end-2026.

Table of Contents

• Overview
• Main strategies
• Main changes to our forecasts
• EMEA: Turkey to stay put for now
• Asia: deepening economic divergence
• Indonesia: after the off-cycle 25bp hike
• Taiwan: CBC on hold in June
• Latam: still counting
• Trade ideas
• Interest rates: what's priced in vs our forecasts
• FX: what's priced in vs our forecasts
• Calendar
• Charting the past three months...and the past seven days
• Economic forecasts
• Exchange rate forecasts
• Policy rate forecasts
• Emerging Markets Research advanced tools

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