EM FX ended the week firm, and capped off a good week overall. Best performers last week for ZAR and KRW, while the worst were TRY and IDR. Until we get higher US rates, the dollar may remain under modest pressure. This would help EM maintain some traction, though we remain cautious.
Chile will hold elections Sunday. Former President Pinera is widely expected to win. If so, we expect policies that may be more business-friendly than outgoing President Bachelet enacted in her second term. Chile reports Q3 GDP and current account data Monday. GDP is expected to grow 2.2% y/y vs. 0.9% in Q2
Thailand reports Q3 GDP Monday, which is expected to grow 3.9% y/y vs. 3.7% in Q2. Bank of Thailand is on hold for now, and the lack of price pressures should allow steady rates well into 2018. Next policy meeting is December 20, no change expected then
Taiwan reports October export orders and Q3 current account data Monday. Export orders are expected to rise 8% y/y vs. 6.9% in September. Orders have been slowing in recent months, suggesting a softer export outlook in 2018. October IP will be reported Thursday, which is expected to rise 4.2% y/y vs. 5.2% in September.
Poland reports October construction and industrial output, retail sales, and PPI Monday. The data are expected to show continued robustness in the economy. Central bank minutes will be released Thursday. The MPC remains split but the doves have the upper hand for now.
Korea reports trade data for the first 20 days of November Tuesday. Signs of slowing growth in the mainland China economy do not bode well for the regional economies. Furthermore, won strength has pushed the key JPY/KRW cross down to 9.71, its lowest level since December 2015. Korean exporters like this cross to be above 10 for the sake of competitiveness.
Hungary central bank meets Tuesday and is expected to keep policy steady. The bank just eased at its September meeting and continues to send a dovish message. If the bank were to ease again, it would most likely be at the December 19 meeting.
Malaysia reports October CPI Wednesday, which is expected to rise 4.0% y/y vs. 4.3% in September. The central bank does not have an explicit inflation target. However, the robust economy has led the bank to start talking about adjusting policy but stressing that it would be a “normalization.”
South Africa reports October CPI Wednesday, which is expected to rise 4.8% y/y vs. 5.1% in September. SARB meets Thursday and is expected to keep rates steady. While a firm rand might tempt it to cut rates, we think it’s unlikely ahead of both S&P and Moody’s planned ratings statements Friday.
Singapore reports October CPI Thursday, which is expected to remain steady at 0.4% y/y. October IP will be reported Friday, which is expected to rise 16% y/y vs. 14.6% in September. The economic data is coming in more robust in recent months. While we do not expect the MAS to tighten at its next meeting in April, it may take a more hawkish stance.
Brazil reports mid-November IPCA inflation and October current account data Thursday. Price pressures are picking up, which supports the notion of a 50 bp cut to 7% December 6 and then no more easing.
Mexico reports mid-November CPI Thursday. Headline inflation is expected at 6.42% y/y vs. 6.3% in mid-October. Banxico also releases minutes Thursday. Inflation is ticking higher, but we do not think the central bank wants to hike again. Next policy meeting is December 14, and no change is likely. However, a hawkish surprise is possible if peso weakness accelerates.
Colombia central bank meets Friday and is expected to keep rates steady at 5.0%. The bank just surprised the markets with a 25 bp cut last month, and another one this month seems to soon. Still, inflation is falling again even as the economy remains weak and so we see continued easing in 2018.
Opinions expressed are solely of the author’s, based on current market conditions, and are subject to change without notice. These opinions are not intended to predict or guarantee the future performance of any currencies or markets. This material is for informational purposes only and should not be construed as research or as investment, legal or tax advice, nor should it be considered information sufficient upon which to base an investment decision. Further, this communication should not be deemed as a recommendation to invest or not to invest in any country or to undertake any specific position or transaction in any currency. There are risks associated with foreign currency investing, including but not limited to the use of leverage, which may accelerate the velocity of potential losses. Foreign currencies are subject to rapid price fluctuations due to adverse political, social and economic developments. These risks are greater for currencies in emerging markets than for those in more developed countries. Foreign currency transactions may not be suitable for all investors, depending on their financial sophistication and investment objectives. You should seek the services of an appropriate professional in connection with such matters. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete in its accuracy and cannot be guaranteed.
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