EM’s outperformance is impacting broader asset classes – Danske Bank

Research Team at Danske Bank, believes that the USD will weaken further versus emerging market currencies but local drivers imply that the EUR (Brexit risk) and the JPY (BoJ easing) should weaken. 

Key Quotes

“Our quantitatively based business cycle model MacroScope gives a neutral recommendation for risky assets. The US has the most positive signal, while Europe is still negative. This supports the outperformance we are currently seeing of US equities relative to European equities.

Fundamentally, we look for emerging market equities to outperform developed market equities. The negative European signal in MacroScope supports our call for core euro yields to fall. Sluggish euro inflation expectations and the ECB’s upscaled QE programme support this view but the risk here is the continued rise in the oil price.”