EM Preview for the Week Ahead

EM FX ended last week on a firm note but the week was still a bad one. We think risk-off impulses will continue and likely intensify in the coming weeks. As such, we remain negative on EM as an asset class. China will provide its first glimpse of October with PMI readings, while US jobs report Friday will be the data highlight of the week. 

South Africa reports September money and credit data Monday. Both are expected to slow from August. Q3 unemployment will be reported Tuesday and is expected at 27.4% vs. 27.2% in Q2. September budget data will also be reported that day, while trade data will be reported Wednesday. Next SARB policy meeting is November 22. Much will depend on how the rand is trading but we think it’s likely to stand pat then.

Brazil reports September consolidated budget data Monday. The central government deficit was slight better than expected, but still widened from August. COPOM meets Wednesday and is expected to keep rates steady at 6.5%. Markets now see little risk of a hike until 2019. Brazil reports September IP Thursday, which is expected to contract -0.8% y/y vs. +2.0% in August.

Mexico reports Q3 GDP Tuesday, which is expected to grow 2.4% y/y vs. 2.6% in Q2. While the economy remains sluggish, rising inflation has forced Banxico to tilt more hawkish. Next policy meeting is November 15. Much will depend on how the peso is trading but we think it’s likely to stand pat then.

Korea reports September IP Wednesday, which is expected to contract -5.1% y/y vs. +2.5% in August. October CPI and trade will be reported Thursday. Inflation is expected to tick up to 2% y/y, while exports are expected to rise 18% y/y and imports by 19.9% y/y. While inflation would match the 2% target, real sector data remains very weak. Next BOK policy meeting is November 30 and we think it’s likely to stand pat then.

China reports official October manufacturing PMI Wednesday, which is expected at 50.6 vs. 50.8 in September. Caixin reports its China manufacturing PMI Thursday, which is expected to remain steady at 50. Policymakers are clearly concerned about the slowing economy and so further stimulus measures are likely if softness continues in Q4.

Turkey reports September trade Wednesday. The central bank also releases its quarterly inflation report that day. The strong lira allowed the bank to stand pat last week even though inflation remains way above target. Next policy meeting is December 13. Much will depend on how the lira is trading but we think it’s likely to stand pat then.

Poland reports October CPI Wednesday, which is expected to rise 1.8% y/y vs. 1.9% in September. If so, inflation would remain well below the 2.5% target and near the bottom of the 1.5-3.5% target range. Next policy meeting is November 7, and we think it’s likely to stand pat then.

Chile reports September IP Wednesday, which is expected to contract -0.6% y/y vs. -1.8% in August. Despite mixed real sector data, the central bank felt comfortable enough to start the tightening cycle last month with a 25 bp hike to 2.75%. Next policy meeting is December 4, and we think it’s likely to stand pat then.

Thailand reports October CPI Thursday, which is expected to remain steady at 1.33% y/y. If so, inflation would remain well below the 2.5% target and near the bottom of the 1-4% target range. Next policy meeting is November 14, and we think it’s likely to stand pat then.

Indonesia reports October CPI Thursday, which rose 2.88% y/y in September. If so, inflation would remain well below the 3.5% target and near the bottom of the 2.5-4.5% target range. Next policy meeting is November 15, and we think it’s likely to stand pat then.

Czech National Bank meets Thursday and is expected to hike rates 25 bp to 1.75%. If so, it would be the fourth straight hike and the seventh overall in this tightening cycle. CPI rose 2.3% y/y, above the 2% target but still within the 1-3% target range.

Colombia reports October CPI Saturday, which is expected to rise 3.35% y/y vs. 3.23% in September. If so, inflation would remain well above the 3% target but within the 2-4% target range. The central bank just kept rates steady on Friday at 4.25%. Next policy meeting is December 21, and we think it’s likely to stand pat then before starting the tightening cycle in Q1.