Brazil Central Bank Preview

Brazil’s COPOM meets tomorrow and is expected to keep rates steady at 6.5%. The tightening cycle should begin in October, but much will depend on the real and how it trades around next month’s elections. Volatility is likely to remain high and tied to opinion poll results.

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Dollar Slips, though Emerging Markets Trade Heavily

The US dollar is seeing its pre-weekend gains pared.  Trade tensions are running high as the US is said to be preparing to levy new tariffs on China as early as today.  Meanwhile, the better tone of Brexit talks lends sterling a hand.  Emerging market strains are re-appearing after a brief hiatus in the second half of last week.  

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EM Preview for the Week Ahead

EM FX ended mixed in Friday, capping off an up and down week. RUB and TRY initially firmed on their respective rate hikes but gave back some of those gains heading into the weekend. Trade tensions are likely to remain high, as press reports suggest President Trump is pushing ahead with tariffs on $200 bln of Chinese imports even as high-level talks are planned. With US rates pushing higher, we think the backdrop for EM remains negative. Continue reading “EM Preview for the Week Ahead”

What Has Changed in EM

  • US Treasury Secretary Mnuchin announced that he invited his China counterparts for another round of high-level trade negotiations
  • Czech central bank has signaled another imminent rate hike
  • The European Parliament voted to censure Hungary for eroding democratic values
  • The US State Department announced that it is working on a second round of sanctions on Russia for November
  • Central Bank of Russia delivered its first rate hike since 2014
  • Central Bank of Turkey delivered a hawkish surprise, raising all rates by 625 bp
  • Former Brazil President Luiz Inacio Lula da Silva officially endorsed his running mate Fernando Haddad as the PT candidate
  • Incoming Mexico President Andres Manuel Lopez Obrador (AMLO) pledged to boost Pemex spending Continue reading “What Has Changed in EM”

Dollar Losses Extended

  • The US dollar remains on the defensive after retreating yesterday
  • A weaker than expected Swedish CPI report is weighing on the krona
  • The Turkish lira rallied in response to yesterday’s surprising 625 bp hike
  • US data highlights include retail sales, IP, and the University of Michigan’s consumer confidence survey
  • Central Bank of Russia is expected to keep rates steady at 7.25% Continue reading “Dollar Losses Extended”

Russia Central Bank On Hold as Sanctions Pile Up

The Central Bank of Russia is expected to keep rates steady tomorrow. Just today, a new round of sanctions was just announced by the State Department while the EU extended existing sanctions for another six months. More are expected in the coming months and tensions with the West remain high as Russia conducts the largest military exercise since 1981 this week. Continue reading “Russia Central Bank On Hold as Sanctions Pile Up”

Markets Vulnerable to Disappointment

  • There is an eerie calm in the markets ahead of the highlight for the day and week
  • Australia reported 44k new jobs in August, nearly three times more than expected
  • After deciding unanimously to lift rates last month, there is practically no chance of another BOE rate hike today
  • The main feature of the ECB meeting may be the staff’s forecasts.
  • US CPI may not get much attention as the ECB press conference commands more attention
  • Central Bank of Turkey is expected to hike rates 325 bp to 21%; ahead of the decision, Erdogan explicitly called for rates to be cut
  • Peru central bank is expected to keep rates steady at 2.75% Continue reading “Markets Vulnerable to Disappointment”

Turkey Central Bank Preview

The Turkish central bank meets tomorrow and is expected to hike rates 325 bp to 21%. The lira has stabilized since last week, after the bank pledged to act after the high August CPI print. However, the bank has tended to disappoint at every juncture during this crisis and we expect this streak to continue. Continue reading “Turkey Central Bank Preview”

Dollar Chops in Narrow Ranges

  • Eurostat confirmed that EMU industrial output fell for a second consecutive month in July
  • We anticipate that the ECB staff will shave its growth forecasts, which are announced tomorrow
  • The EC’s confrontation with Hungary may come to a head today
  • The Canadian dollar is firm on reports that it is willing to make a concession on dairy, a sector not included in the current NAFTA
  • The US session features the August PPI and the Fed’s Beige Book ahead of the meeting on September 26
  • China reported weaker than expected money and loan data for August
  • Singapore retail sales contracted -2.6% y/y in July vs. +0.7% expected; India reports August CPI and July IP Continue reading “Dollar Chops in Narrow Ranges”