Gold prices tick higher on fresh US tariff threats, Fed rate cut hopes
Investing.com -- JPMorgan, the investment bank, downgraded its recommendation for emerging currencies to "underweight" following a hike in U.S. tariffs that surpassed its worst-case scenario. U.S. President Donald Trump announced late Wednesday that "reciprocal" tariffs would range from 10% to above 40%.
According to a note from the bank, this tariff round is viewed as a key turning point for the outlook of emerging market (EM) fixed income in the upcoming months. The bank anticipates that the shock to sentiment and capital flows will likely persist, necessitating higher risk premiums.
While JPMorgan maintained its underweight stance on emerging market sovereign and corporate credit, it elevated the status of emerging market local bonds to marketweight.
The bank noted that emerging Asia and Europe were impacted more on a relative basis than Latin America and frontier markets. It also projected that emerging markets in Asia could experience further foreign exchange weakness and lower policy rates.
Additionally, JPMorgan warned of possible reciprocal retaliation that could dampen risk and business sentiment. This situation would require riskier high-yield assets to trade at a larger premium compared to their investment-grade counterparts.
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