THE EM TRADER: CEE-ing through the Vol

In the last couple of weeks EM currencies, equities and spreads have moved largely sideways, displaying impressive resilience in the face of energy price volatility and building Fed hike probabilities, even as local rates have tracked core rate pressures. The hawkish Fed meeting on 16 September added to this, although if the hiking cycle is limited and it helps anchor rate volatility in this sturdy growth and positive risk environment, the macro backdrop for EM should continue to be supportive. EM local rates continue to be at the mercy of energy price volatility, with supply-side concerns now extending beyond crude oil to European natural gas, which continues to trend higher and add to hawkish impulses on CEE rates. Broad-based relief in EM rates is contingent on lower energy prices;