The latest easing measures from the ECB have sparked some action in the Southern European fixed income markets, but the spill-over to Central and Eastern Europe has so far been very limited. Hence, we have not seen any major effect on the CEE currencies or fixed income markets. And there has been no impact at all on the broader Emerging Markets. That said, the Polish zloty has been doing particularly well recently and we would certainly not rule out the possibility that the ECB's easing measures are having a positive impact on the zloty. Furthermore, our EMEA scorecard for the zloty is sending rather bullish signals at the moment - indicating that EUR/PLN could move down towards 4.00 on a 1-3M horizon.
Islamists have apparently gained control over cities Mosul and Tikrit in the northern and central part of Iraq. The violence is therefore moving closer to the large Bai Hassan and Kirkuk oil fields in Northern Iraq. The Oil market has so far ignored the escalating chaos although the risk that Iraqi supplies will be affected by the internal conflict has increased. From an EMEA market perspective, the increased tensions in Northern Iraq are most important for the Turkish markets and if the conflict escalates - and particularly if the Turkish government were to intervene militarily directly into Northern Iraq - it might have a negative impact on the Turkish markets. However, for now we do not see this - on its own - as a reason to exit long positions in the Turkish markets.
The football World Cup kicks off today in Brazil. In a recent paper we took a look at the expected outcome of the World Cup. Our models clearly indicate that Brazil will win the World Cup. On the other hand, it is not going to be a good World Cup for the EMEA countries. These are our estimated probabilities for an EMEA team to win: Russia (1.6%), Croatia (0.3%), Nigeria (0.2%), Algeria (0.2%), Ivory Coast (0.2%), Bosnia (0.1%), Ghana (0.1%). In the report you will also find macroeconomic and FX forecasts for these countries. See our Research: World Cup 2014 Special .
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