EM's firmer on French election result for R1 - BBH

EM Preview for the Week Ahead 

Analysts at Brown Brothers Harriman explained that EM FX is starting the week off on a firm note as “risk on” prevails in the wake of the first round French presidential election.  

Key Quotes:

"We see no reason to stand in the way of this EM bounce, as the combination of receding global political risk and soft US data are likely to encourage a continued appetite for risk.  
Singapore reports March CPI Monday, which is expected to remain steady at 0.7% y/y.  The MAS does not have an explicit inflation target.  However, it left policy steady at its policy meeting this month and left its language unchanged. Singapore then reports March IP Wednesday, which is expected to rise 5.6% y/y vs. 12.6% in February.

Taiwan reports March IP Monday, which is expected to rise 6.1% y/y vs. 10.6% in February. Growth is recovering, and strong export orders suggest further improvement in H2.  Taiwan then reports Q1 GDP Friday, which is expected to grow 2.5% y/y vs. 2.9% in Q4.

Mexico reports mid-April CPI Monday, which is expected to rise 5.59% y/y vs. 5.02% in mid-March.  Even though inflation is still rising, we think the firm peso will allow Banxico to stay on hold May 18.  If the Fed hikes June 14, then Banxico should follow it with another 25 bp hike to 6.75% on June 22. Mexico reports March trade Thursday.  Q1 GDP will be reported Friday, which is expected to grow 2.5% y/y vs. 2.4% in Q4.

Hungary’s central bank meets Tuesday and is expected to keep policy steady. It eased further via unconventional measures at its March meeting and so no further action is likely until the June meeting.  If inflation continues to rise, we believe further easing is unlikely.    

Brazil reports March current account and FDI data Tuesday.  It reports central government budget data Thursday, followed by consolidated budget data Friday. The sluggish economy has hurt revenue collection, but lower interest rates should help limit interest payments.  

Turkey’s central bank meets Wednesday and is expected to keep rates steady.  Half the analysts polled by Bloomberg look for a hike in the Late Liquidity Window rate, but we think the firmer lira gives the bank leeway to remain on hold near-term.  The bank releases its quarterly inflation report Friday, which should give further insight to the bank’s outlook for rates. Turkey also reports March tradeFriday.

Korea reports Q1 GDP Thursday, which is expected to grow 2.6% y/y vs. 2.4% in Q4. It then reports March IP Friday, which is expected to rise 4.0% y/y vs. 6.6% in February.  Given the downside risks to the economy from political risk (both internal and external), we think BOK is on hold for now even though inflation is rising.  Next policy meeting is May 25, no action is seen then.  

Israel reports February manufacturing production and March trade Thursday. The economy is robust, even as price pressures are picking up. We see no further stimulus measures, though we expect the central bank to continue intervening to prevent excessive ILS strength.

South Africa reports March money and private sector credit, trade, and budget data Friday. The economy remains soft, but above target inflation is preventing the SARB from cutting rates.  If disinflation continues, a rate cut is possible in H2 but much depends on the rand and the external environment.  Next policy meeting is May 25, no action seen then.

Central Bank of Russia meets Friday and is expected to cut rates 25 bp to 9.5%.  A small handful of analysts look for steady rates, but we think lower than expected inflation of 4.3% y/y in March will allow the bank to cut 25 bp again.  

Poland reports April CPI Friday, which is expected to rise 2.1% y/y vs. 2.0% in March.  Some members of the MPC are starting to push back against the dovish forward guidance of no hikes until 2018.  We believe the first hike is likely to come in H2 of this year.  Next policy meeting is May 17, no action is seen then."  

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news

GME stock positioned for another short squeeze

Get the full analysis and chart in our Insights. Upgrade to Premium today    

Latest Forex News

Latest Forex News

Editors’ Picks

EUR/USD loses 1.21 as the dollar extends its gains

EUR/USD has dipped below 1.21, some 70 pips down on the day as the dollar recovers alongside Treasury yields. US Consumer Sentiment beat estimates with 86.4 points. 


GBP/USD retreats amid UK GDP miss, reopening concerns

GBP/USD is hovering around 1.4150, down on the day. UK GDP missed with 2.3% in April and a four-week delay to Britain's reopening is speculated. The greenback is gaining some ground.


XAU/USD drops back below $1900, as US dollar rebounds ahead of data

Gold price has retraced below the $1900 mark once again, having tested Tuesday’s high near $1903. The latest leg down in gold price comes on the back of a tepid bounce staged by the US dollar, as the Treasury yields trim losses across the curve.

Gold News

Ethereum price prepares for a bullish weekend, targeting $3,000

Ethereum price seems prime to revisit $3,000. Although ETH faces resistance at $2,300, the upswing seems imminent. A downswing below $2,000 could invalidate the bullish thesis. 

Read more

Hot Inflation is warming the seat for the June FOMC

Americans are seeing the fastest price increases since their seventh-graders were born as inflation builds into the US economy from the disruptions of the pandemic lockdowns. Core CPI at 3.8% is the steepest gain in 29 years.

Read more