EM Preview for the Week Ahead

EM FX ended the week soft as the dollar continued to claw back recent losses on the back of higher US rates. US jobs data this Friday will be very important to keep the trend of rising US rates going. Meanwhile, low inflation in EM should allow central banks to start contemplating rate cuts, though none are expected to cut anytime soon.

Malaysia reports January trade Monday. Exports are expected to rise 1.4% y/y and imports by 1.2% y/y. Bank Negara then meets Tuesday and is expected to keep rates steady at 3.25%. CPI fell -0.7% y/y in January. While the bank does not have an explicit inflation target, low prices should allow it to keep rates on hold this year.

Turkey reports February CPI Monday, which is expected to rise 19.9% y/y vs. 20.35% in January. The 3-7% inflation target range has become irrelevant. The central bank then meets Wednesday and is expected to keep rates steady at 24.0%. It is likely under some pressure to cut rates but can’t do so given recent lira weakness.

Korea reports February CPI Tuesday. Inflation remains well below the 2% target. Next policy meeting is April 18, and rates are expected to be kept steady at 1.75%. Indeed, low inflation and sluggish growth should allow BOK to remain on hold for now. Korea reports January current account Friday.

The Philippines reports February CPI Tuesday, which is expected to rise 4.0% y/y vs. 4.4% in January. If so, it would be right at the top of the 2-4% target range. Next policy meeting is March 21, and rates are expected to be kept steady at 4.75%. However, if disinflation continues, the central bank is likely to start cutting rates near mid-year.

Hungary reports January retail sales Tuesday, which are expected to rise 3.9% y/y vs. 4.1% in December. January IP will be reported Thursday, which is expected to rise 3.2% y/y WDA vs. 5.7% in December. February CPI will be reported Friday, which is expected to rise 2.9% y/y vs. 2.7% in January.

South Africa reports Q4 GDP Tuesday, which is expected to grow 0.6% y/y vs. 1.1% in Q3. Next policy meeting is March 28, and rates are expected to be kept steady at 6.75%. Q4 current account will be reported Thursday, and the deficit is expected to shrink to -3.2% of GDP from -3.5% in Q3.

Colombia reports February CPI Tuesday, which is expected to rise 3.14% y/y vs. 3.15% in January. If so, inflation would remain well within the 2-4% target range. Next policy meeting is March 22, and rates are expected to be kept steady at 4.25%.

National Bank of Poland meets Wednesday and is expected to keep rates steady at 1.5%. CPI rose 0.9% y/y in February, below the bottom of the 1.5-3.5% target range. The central bank has started to raise the possibility of a rate cut. However, recently announced fiscal stimulus are likely to do the heavy lifting for now.

Mexico reports February CPI Thursday, which is expected to rise 3.94% y/y vs. 4.37% in January. If so, inflation would move back within the 2-4% target range for the first time since December 2016. Next policy meeting is March 28, and rates are expected to be kept steady at 8.25%. If disinflation continues and the peso remains relatively stable, we think Banxico will probably start an easing cycle in H2.

Peru central bank meets Thursday and is expected to keep rates steady at 2.75%. CPI rose 2.0% y/y in February, right at the target and at the center of the 1-3% target range. The economy is sluggish and price pressures are low, and so the bank is likely to be cautious about starting the tightening cycle.

China reports February trade Friday. Exports are expected to contract -2.2% y/y while imports are expected to rise 1.3% y/y. February CPI and PPI will come out Saturday morning local time. CPI is seen rising 1.5% y/y while PPI is seen rising 0.2% y/y. The rise in the Caixin manufacturing PMI in February suggests some impact is being felt from stimulus but more evidence of a turnaround is needed.

Taiwan reports February CPI and trade Friday. CPI inflation is expected to rise 0.3% y/y vs. 0.2% in January, while exports are expected to contract -0.3% y/y and imports are expected to rise 6.9% y/y. While the bank does not have an explicit inflation target, low prices should allow it to keep rates on hold this year. Next policy meeting is March 21, and rates are expected to be kept steady at 1.375%.