A US-China trade deal is close. Adherence to the spirit of the deal will be difficult; the countries have completely different economic systems that will not converge by ending punitive tariffs and buying more planes. Most appreciation of CNY has already occurred. When a deal is signed, markets will refocus on weak economic data. Chinese equities will react positively as will nearby currencies, AUD, THB and IDR. In Turkey, issues with TRY are troubling. The outlook for emerging markets is already shaky. Equities are up, but central banks are cutting economic forecasts. They can’t both be right. Eastern European currencies such as HUF and PLN will come under selling pressure.
By Peter Rosenstreich
