Review
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Yesterday, PMIs for October were published across the EMEA region. They showed a mixed result. Read our flash comment on October’s PMI.
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Yesterday, the Latvian government submitted the 2010 budget to parliament. The first vote on the 2010 budget will be on Thursday 5 November and the second is likely in the first half of December. It is still unclear whether this budget fulfils the IMF and EU’s demands.
Preview
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Russian and Turkish inflation in the spotlight today. Lacklustre economic activity in the Turkish economy and a strong base affect should push inflation to a new record low of 4.3% y/y in October. However, in our view inflation will bottom in October and then gradually rise to around 6% in Q2 2010. Hence the room for more rate cuts is fairly limited. In Russia, we expect inflation to move down to single-digit territory to 9.7% y/y in October. With the inflation outlook turning more benign, we see room for more rate cuts from the Russian central bank in the coming months.
Trading update
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The South African rand remained under the pressure throughout Monday as low risk appetite weighed negatively. Nonetheless, later in the afternoon the rand and other EMEA currencies got a boost from the US ISM, which came out better-thanexpected, putting pressure on the US dollar and lifting risk appetite for riskier assets.
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Despite the positive surprise on ISM, our EMEA FX Scorecard remains in negative territory for most EMEA currencies, and we therefore still recommend being positioned for weaker currencies across the region – especially HUF and ZAR.
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Although most EMEA rates inched up on Monday, Czech rates were moderately down ahead of the Thursday’s central bank monetary setting meeting.
