Says the downgrade reflects a sharp deterioration in Q1 activity
- But points to high degree of uncertainty surrounding this growth revision
- Will review its forecast as developments evolve
- Need to gauge the size of the economic drag from the virus outbreak
In other words, it is a tentative view with little in-depth modelling and forecasting being made at this stage – with possible revisions depending on developments surrounding the coronavirus outbreak in and outside of China.
I reckon that is the case for almost everyone in the world as we have to deal with the virus outbreak on a day-to-day basis with evolving opinions.
That said, the firm says that they remain overweight on EM currencies that offers both attractive nominal and real carry, even as they expect a near-term hit to global growth from the virus outbreak situation.
Among the currencies they favour are the RUB, MXN and IDR while they are funding these against underweight exposures to CAD and NZD.
The firm is also overweight in JPY as a hedge for risk-off sentiment during this time.