Bank of America just raised its EUR/USD forecast
On Monday, Citi released an updated analysis of the macroeconomic impact of recent US tariffs, focusing on their effects on emerging markets and US inflation. The study, which takes into account the limitations of their model, such as only being able to adjust tariffs for 13 US trading partners, including China’s retaliation, provides a forecast for the years 2025E-26E. For investors tracking emerging markets, InvestingPro data reveals crucial insights about market reactions, with several exclusive ProTips available for premium subscribers.
According to Citi, Vietnam is expected to experience a growth shock three times larger than that of the US or China, with both of the latter in the 1.8 percentage points (ppts) range. This outlook comes as Vietnam’s market tracker (VNM) shows modest revenue growth of 2.34% and maintains a "GOOD" Financial Health Score of 2.58 on InvestingPro. Other Asian economies, including Thailand, Korea, Taiwan, Malaysia, and Singapore, are projected to be significantly affected, with a growth hit ranging from 1.7 to 2.4 ppts. In Eastern Europe, the Czech Republic and Hungary are anticipated to lead with a growth impact of 1.4 to 1.5 ppts.
The analysis also forecasts an asymmetric inflationary impact, with the US likely to see a 0.9 ppts increase in inflation. In contrast, emerging markets (EM) are expected to experience an average deflation of -1.3 ppts. Citi notes that negotiations between Vietnam and the US for potential tariff relief will be a critical indicator of future trends. The firm suggests that a failure to provide relief for Vietnam could signal the Trump administration’s intention to maintain tariffs without strategic gains in reshoring US jobs.
This situation could potentially necessitate more aggressive policy easing and lead to weaker currencies in Asian markets. Citi’s report highlights the intricate interplay between trade policies and global economic outcomes, emphasizing the need for close monitoring of ongoing negotiations and their potential ripple effects across various economies. According to InvestingPro analysis, Vietnam’s market currently appears undervalued, with strong fundamentals including a healthy current ratio of 2.03 and an Altman Z-Score of 9.6, suggesting resilience against economic pressures.
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