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    EM: Global liquidity outlook has turned back in favor of EM FX - BBH Sandeep Kanihama

    Research Team at BBH, suggests that in light of the May jobs shocker and Yellen’s perceived dovish tilt this month, the global liquidity outlook has turned back in favor of EM. Key Quotes As a result, EM assets are back to challenging the recent highs from April/May. Bottom line: A dovish (for now) Fed outlook should keep this EM bounce alive but turbulence is likely to return later this year. Several EM currencies have fully retraced the May selloff, and we expect more to join this group. With this in mind, we identify possible objectives that in many cases go back to broader EM moves that started back to last autumn. For some, we will need to go back even further to around mid-2015. Note that MSCI EM has retraced over three quarters of its April-May drop. A break above the April 21 high near 856 would set up a test of the November high near 873 and then the mid-July high near 946. MSCI EM has now retraced nearly two thirds of the July-January drop, and the last major retracement objective comes in 847 (62%).”

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