Emerging Markets Navigate Turbulence Amid Trade Policies and Political Shifts

Emerging market equities dropped to a two-week low, while currencies managed to hold firm as investors navigated changes in U.S. trade policies under the Trump administration.

The MSCI index for emerging market equities decreased by 0.8%, with a slight change in the currency index. A trade court ruling found President Trump exceeded his authority on broad tariffs, but the duties were temporarily reinstated as the Trump administration appealed. Despite this, the currency index poised for a significant monthly winning streak in over four years, with the stocks index aiming for its best in nine months.

Globally, investors diverted attention towards other assets amid uncertainties in U.S. investments, forecasted market volatility, and a potential increase in the fiscal deficit. The U.S. dollar was on track for its fifth consecutive monthly decline as Romania's leu rallied following Nicusor Dan's presidential victory, while Poland's zloty dipped ahead of its presidential runoff. Turkey saw a modest 2% economic expansion with concerns over inflation and economic growth remaining, moving to stabilize the market post-Istanbul Mayor's arrest.

(With inputs from agencies.)