Europe, Middle East And Africa In Review

The past couple of months have been very challenging for most Emerging Markets and for EMEA markets. However, we are beginning to see some real signs of stabilisation.

Our EMEA FX Scorecard, which is our main indicator for the short-term (1-3 months) outlook for the EMEA currencies, has turned positive for a number of currencies and it is particularly notable that across currencies the macro score has recently turned decisively more positive.

The macro score in the Scorecard basically measures acceleration/deceleration in macroeconomic variables in each country/currency in the Scorecard. A positive indicates an acceleration in macroeconomic variables.

Hence, the indication from the Scorecard is quite clear: the macroeconomic situation is getting brighter across the EMEA region. In our view, this is clearly supportive for the EMEA currencies and in that regard it is also notable that the relative macroeconomic performance -- particularly for the Central and Eastern European economies -- is turning somewhat more positive than is the case for the Emerging Markets in Asia and Latin America. Hence, for the first time in a very long time, Central and Eastern Europe seem to be the least 'risky' Emerging Markets.

The EMEA economies are undoubtedly getting quite a bit of help from the stabilisation and the continued recovery in the eurozone economies and, even though we are not super bullish on growth in the region, it is clear that we are somewhat away from the horrors of 2008-09 in terms of growth.

We expect a cut from the Russian central bank
We have been calling for a rate cut from the Russian central bank for months now, as slowing credit growth is at least partly responsible for the sluggish GDP growth performance. However, the CBR has kept its extremely hawkish stance also under new chairwoman Elvira Nabiullina. Nevertheless, we expect the CBR to cut all its key policy rates in the meeting on Friday, 13 September by 25bp.

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