EM: Key battle grounds - ING

USD/CNH is up around 1% as markets price in renewed trade wars, ING's FX analyst Chris Turner notes.

Emerging markets to remain under pressure

"In our pre-election scenario analysis, we felt something like 7.30 would be the best case for the onshore USD/CNY under a Trump win scenario where local Chinese authorities would not allow further depreciation. We take the view that they would not devalue the renminbi - as they did in summer 2019 - and instead are playing the long game of keeping the renminbi as a store of value to compete on the world stage. However, the renminbi will of course remain under pressure."

"In Europe, much attention is on the Hungarian forint. It looks like the National Bank of Hungary will have to abandon its easing cycle to concentrate on supporting the forint, where EUR/HUF is moving through 410. Look out for action at National Bank of Hungary open market operations - e.g., leaving the market short of liquidity in an attempt to tighten overnight rates and support the forint. Hungarian forward points look to stay under widening pressure."

"In Latam, the Mexican peso has been hit hard (off 3%). 2025 could be a rough year for the peso were presumed president Trump to opine about not renewing the USMCA at its review in 2026. High volatility is also undermining the carry trade and it's hard to rule out a move to 22.00 over coming weeks. Both BRL and CLP had a poor Trump 1.0. Both will be under pressure again but a 50bp rate hike from Brazil today should offer some reprieve."