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Emerging Markets

Global Macro Comment — SEK undervalued and USD overvalued

Although it is widely accepted that exchange rates vary substantially and are difficult to forecast, models based on economic fundamentals can track the evolution of the exchange rate rather well in the long run. Deviations between the actual and the estimated equilibrium exchange rates may be sustained for fairly long periods, but the exchange rate eventually tends to experience a correction toward its equilibrium lev-el. Our new fair value model indicates that the USD is currently overvalued, while the EUR, GBP and CNY are broadly in line with fundamentals and the JPY, NOK and the SEK are undervalued. Our fair value es-timate for USD/SEK is 7.5 and 9.5 for EUR/SEK.

Anders Bergvall, Senior Economist | anbe83@handelsbanken.se

Global Macro Forecast — Global economy on shaky ground

• A downturn is imminent
• Time for politicians to step up
• Interest rates remain low

Lena Fahlén, Head of Economic Research | leli15@handelsbanken.se

Global Macro Forecast — Interest rate hikes despite lower growth

• Geopolitical risks dominate
• Divergence in global growth
• Central banks defy concerns

Global macro forecast — A diverging world

• Geopolitical risks dominate
• US and China dictating the pace
• Shift in economic cycle imminent - slowdown in the pipeline

Global Macro Comment — The lay of "The Land"

What do we really know about inflation? The state of the art was recently laid out by top academics and central bank economists at the "Inflation: Drivers & Dynamics" conference, held at the Federal Reserve Bank of Cleveland. In this comment we give a first-hand account of what was discussed in "The Land". The conference gave greater insight into the anchoring of inflation expectations at central banks' targets, mixed with a new understanding of inflation fundamentals. Change is often hard work, but policymakers would be smart to embrace these latest insights.

Johan Löf, Senior Economist | jolo22@handelsbanken.se

Macro Comment Emerging Markets — EM turmoil not the overture for a full-blown crisis

Some emerging markets (EM) have experienced very severe stock market losses and currency weakening this year, particularly since mid-April, and hardly any EMs have avoided the fallout from a stronger USD and tighter global liquidity. On various vulnerability indicators, several EMs (including Argentina and Turkey) indeed look fragile, and we have most likely not seen the worst yet. On the other hand, the current turmoil should not be the beginning of a widespread EM crisis, in our view, as EMs on aggregate are not much worse off now than before the two most recent EM asset sell-offs.

Bjarke Roed-Frederiksen, Senior Economist | bjro03@handelsbanken.dk