EM Preview for the Week Ahead

Since their post-FOMC peak on January 31, both MSCI EM and MSCI EM FX have fallen. Virtually every EM currency has given up their post-FOMC gains, the lone exception being MYR (+0.2%). The worst performers have been ZAR (-6%), ARS (-3.3%), and TRY (-2.3%). This supports our belief that the liquidity and low US rates story is not enough to sustain the EM rally on its own. What’s still missing is an improved global outlook and we certainly didn’t get that with the US retail sales data. Continue reading “EM Preview for the Week Ahead”

Dollar Resumes Climb Ahead of US Retail Sales and PPI

  • The dollar rally has resumed
  • Press reports suggest the US is weighing a 60-day extension of the tariff deadline
  • US December retail sales and January PPI will be reported
  • Eurozone, Germany, and Japan all reported preliminary Q4 GDP
  • China reported January trade; the EM FX washout continues

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Dollar Mixed as RBNZ and Riksbank Deliver Hawkish Holds

  • Press reports suggest President Trump is leaning towards signing the spending bills that will keep the government open
  • The US reports January CPI
  • Sweden’s Riksbank delivered a hawkish hold and dropped its FX mandate
  • RBNZ kept rates steady at 1.75%, as expectedUK January CPI came in lower than expected; the eurozone reported weaker than expected December IP
  • Czech Republic January CPI rose 2.5% y/y; Brazil December retail sales were weaker than expected

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Dollar Climb Stalls as US Shutdown Averted

  • The dollar rally may be taking a pause
  • US Congressional leaders appear to have avoided a second partial government shutdown
  • The parade of Fed speakers continues
  • UK Prime Minister May is scheduled to make a statement to Parliament today
  • The Bank of Japan reduced the amount of bonds it is buying for the first time in two months
  • RBNZ decision is due out this evening after North American markets have closed
  • Taiwan January CPI rose 0.20% y/y; South Africa reported Q4 unemployment and December manufacturing production

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From the Securities Lending Trading Desk

In the Americas, investors are wary not to overlook the fact that there is still plenty of regulatory red tape that TELL must cut through before 2023 operations are expected to start. In Asia, Japanese telecommunication giant Softbank Group Corp unveiled plans for the biggest share buyback in the company’s history. In Europe, Spanish food store provider Distribuidora Internacional (DIA SM) rallied 70% this week following news that the board is to work with Mikhail Fridman and his investment firm, LetterOne.

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Thai Politics Get Even Messier

Elections will be held in Thailand on March 24. These will be the first since the 2014 coup brought a military junta to power. The country remains deeply divided, with the recent candidacy and quick disqualification of Princess Ubolratana further muddying the waters.

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Drivers for the Week Ahead

  • The dollar rally continues, with DXY up for the eighth straight day
  • Press reports suggest that a US budget deal may not be struck
  • The US reports January CPI, PPI, and retail sales this week
  • Reports suggest the US and China remain far apart in trade talks
  • There is little Brexit news, but the UK economy continues to soften
  • RBNZ meets Wednesday and Sweden’s Riksbank meets Thursday; both are expected to keep rates steady
  • EM FX continues to surrender much of their post-FOMC gains

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EM Preview for the Week Ahead

EM FX ended the week mixed but gave up much of their post-FOMC gains as the week progressed. MYR, PHP, and MXN were the best EM performers for the week and posted small gains. ZAR, BRL, and ARS were the worst in EM, dropping nearly 2% against USD. US-China trade talks and Chinese data are likely to set the tone for EM this week. Reports that the US government may shut down again should weigh on risk assets.

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What Has Changed in EM

  • Reserve Bank of India delivered a dovish surprise
  • Thai Princess Ubolratana announced she is running for Prime Minister
  • EU President Donald Tusk may return to Polish politics
  • South Africa President Cyril Ramaphosa unveiled plans to boost the economy and create jobs
  • Euphoria over Brazil’s prospects has faded a bit
  • Banco de Mexico delivered a dovish hold

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