EUR profits from calmer EM markets

During the course of last week EUR-USD slowly but surely crept from levels around 1.1150 to levels at now roughly 1.1350. A reduction in EM risks would now have to be seen as a EUR positive signal. 

And indeed the EUR appreciation was accompanied by the EM markets becoming a little calmer. The exchange rates of BRL and TRY have at least stabilised, ZAR was even able to recover slightly and also the CDS spreads of most EM currencies have fallen slightly. 

ECB President Mario Draghi had stressed the EM risks at the last ECB press conference and suggested an interpretation according to which the ECB might extend its QE programme should these risks deteriorate. 

In particular in comparison with the Fed, whose representatives had presented themselves as totally relaxed about EM risks, the European central bankers seemed much more prepared to react to EM risks. 

"One had to assume that a potential EM crisis would have affected the ECB's monetary policy far more than the Fed's monetary policy. Therefore it would have put much more pressure on the euro rather than the dollar. The most recent development now suggests that this scenario will not arise which is therefore a EUR positive signal", says Commerzbank.