Global Macro Strategy: Adding EM carry, closing rates RV trades post US CPI

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Global Macro Strategy: Adding EM carry, closing rates RV trades post US CPI

un-2026). Now softer-than-expected US data and the oil

rally are undermining the trades. We decide to close the trades here. Lastly, in our

asset allocation, we move FX from short EURUSD to flat. Note: Futures trading

involves substantial risk of loss.

Carry on despite US-Iran: add FX carry. We flagged last week (Themes Into 2H26,

09-Jul-2026) that while EMFX carry remains highly crowded, performance has not

disappointed given subdued vol. Softer-than-expected US data could imply a

range-bound US front-end and USD, as mentioned above. A goldilocks summer is

likely to remain supportive of EMFX carry. While Iran remains a risk, our

commodities team believes a renewed deal is still likely (see Oil Monitor - Conflict

in the SoH resumes, what does this mean for oil?). But given US-Iran tensions, we

also screen for currencies that performed well in early 2026 despite (or thanks to)

rising oil. Figure 2 shows carry to vol on the x-axis against the CCY-USD

performance from the beginning of the US-Iran conflict, to the peak in oil prices on

31-Mar.

BRL, COP, and TRY screen as attractive longs based on the chart. There are some

near-term risks in Brazil with the October election between incumbent President

Lula and opposition candidate Flavio Bolsonaro. Polls are quite tight, but Lula has

pulled ahead recently as corruption charges around Daniel Vocaro tied to Flavio

were leaked. Party conventions start toward the end of July. COP has had a strong

run post-election and should continue to do well before ADLE enters office. Going

into the Brazil election, investors seeking carry trades may rotate from BRL into

COP as the other high carry trade in Latam. With positively surprising inflation,